Tackling financial fraud: How threats are changing throughout the global downturn

Right now, households in the UK are facing some of the most challenging economic conditions in decades. 

Although economic forecasts have shown a touch of optimism in recent weeks, the economy is still reeling from the combined effects of the war in Ukraine and the pandemic. In particular, inflation has remained at elevated rates – contrary to the 9.9% drop economists had predicted, the consumer price index (CPI) recently increased by 10.4%, up from January’s 10.1%. Meanwhile, the Office for Budget Responsibility (OBR) predicts that the economy will shrink by 0.2% this year.

Against this backdrop, consumers are seeing their spending power significantly reduced, while many will be suffering as a result of higher debt repayment costs brought on by interest rate hikes. To make matters worse, these conditions are being accompanied by an uptick in financial fraud, as scammers are taking advantage of the cost-of-living crisis, exploiting some of the nation’s most vulnerable people.

From false energy bill rebates to cost-of-living payments, ensuring that consumers are aware of changing threats and what to do if they are targeted by fraudsters is crucial. Here are some new trends to be aware of, as well as best practices that banks and fintechs should follow to support their customers.

1. Cost-of-living payments 

Launched by the UK Government back in May 2022, cost-of-living payments offer means-tested benefits to low-income households and those most affected by inflation.

Following the introduction of these measures, Action Fraud and the Department for Work and Pensions (DWP) have issued warnings to consumers related to cost-of-living assistance, following reports of scam phone calls, emails and text messages.

In one of the scams, the victim is asked to apply for the payments by registering via a link, which leads them to a legitimate-looking website. The website is designed to make consumers give up their personally identifiable information (PII) and financial details, which can then be used by scammers to take out credit in their name.

Anyone eligible for cost-of-living assistance need not apply for the payment or contact the DWP directly – payments are always made automatically.

2. Investment and Authorised Push Payment (APP) fraud

Other schemes on the rise include investment and authorised push payment (APP) fraud, designed to take advantage of those trying to build up savings to cope with rising costs, or settle credit via alternative income sources. 

Victims are often contacted by fraudsters out of the blue, persuading them to invest in bogus investment ‘opportunities’ that promise high returns. Consumers are manipulated into unwittingly making real-time payments to fraudsters, with the perpetrator ceasing all contact with the victim once they have received payment. 

According to a report from ACI Worldwide and GlobalData, losses to APP fraud are set to double across the UK, India and the US in the next four years, reaching $5.25bn as a result of the growth of real-time payments. In the UK specifically, APP volumes in 2021 amounted to $789.4m, with the potential to rise to a staggering $1.56bn by 2026.

3. Energy price cap fraud 

Similar to cost-of-living payment fraud, there has also been an increase in fraudulent text messages and emails from fraudsters posing as the UK Government, encouraging unsuspecting consumers to apply for the Energy Bill Support Scheme. 

 These messages contain links to genuine-looking websites, designed to steal personal and financial information. However, households in the UK are not required to apply for the Government’s Energy Bill Support Scheme and will never ask for consumers’ bank details in this way. 

Supporting customers

To protect consumers and guard against growing fraud risks, it’s vital for banks, fintechs and businesses offering financial services to provide their customers with adequate educational resources and communications, helping them to better identify fraud and make sound decisions about their finances as new threats emerge.

Directing consumers towards the Financial Conduct Authority (FCA) register and Warning List, for example, is one way that businesses can empower consumers to check whether an investment or pension opportunity is genuine. In addition to this, it’s vital to clearly sign-post the correct procedures that people should follow if they’ve been defrauded – from listing the relevant contact details at their bank and Action Fraud, to detailing how they can seek compensation.

Investing in the right technologies to identify unusual transactions and financial behaviours, and verify that existing customers are making genuine requests, is equally vital. Access to analytics and KYC technologies that ensure that the person transacting with the bank is who they claim to be are fundamental in this regard and will help to safeguard against fraudsters requesting financial services under false pretences – particularly real-time payments.

Tough economic conditions look set to continue in the short to medium term, and while fraudsters will not go away entirely, it’s essential that banks, fintechs and companies do everything they can to educate and safeguard their customers as new threats emerge. Remaining vigilant, investing in the right solutions and encouraging consumers to seek help where necessary is the key to minimising risk and losses.