Criminals are constantly identifying new ways of
convincing innocent people to be unwitting participants in crimes, and
unfortunately, the number of victims and the size of the losses continue to
increase.
In 2022, the Federal Trade Commission highlighted that consumers in the US lost nearly $8.8
billion to fraud, an increase of more than 30% over the previous year. In the UK, over £1.2 billion was stolen by criminals last year, equivalent to
over £2,300 every minute.
Data exchange between the public and
private sectors is critical in the battle to stifle organised criminals from
committing fraud. However, data sharing is loaded with difficulties in
particular privacy laws and consumer protection, which can slow down attempts
to stop crime as it is being committed.
The rise of cutting-edge technologies such as AI has also diversified
the toolkit of modern cyber-criminals, who
are now using techniques such as AI voice cloning tools to dupe victims.
This has made it even more difficult for the industry to stop.
To combat increasingly sophisticated fraud, modern solutions and
technologies must be adopted by the payments industry to enable effective data-sharing
between the public and private sectors to reduce crime.
Regulatory Capture. When regulators look the other way at the fraud in our financial markets
“…The lawyers at the SEC are not paid well..what they’re looking for is a trophy.
From the SEC they’re looking for something that they can put on Linked In.From that they can get… https://t.co/vm4Hv4CIs8
— kristen shaughnessy (@kshaughnessy2) November 10, 2023
Why Data Sharing Is Critical
Public and private institutions have access to critical data sets
that can help identify fraudulent behaviour and bad actors. Through
collaboration, each can build a fuller, more informed picture of potentially
suspicious behaviour.
Traditionally, transactional data has been used by institutions to
identify fraud as it contains information about parties, dates, amounts and
locations. More modern fraud identification models have developed which provide
more in-depth customer analysis on preferences and purchase history.
By improving the flow of this information between public and
private sectors, institutions can utilise what is already known about a
customer to help determine whether certain abnormal behaviour is potentially
fraudulent.
Unfortunately, key data sets are often siloed within complex
systems that require callouts to third parties. As a result, external
institutions are often unable to reap the benefits that derive from accessing
key information around transactional history and customer information.
Stringent GDPR laws are rightfully put in place to uphold an
individual’s fundamental right to privacy and protect sensitive consumer data. However,
privacy laws can impede efforts to combat fraud as soon as it is happening.
New Technological Solutions
Thankfully, advancements and the
adoption of new privacy-enhancing technologies (PETs) and artificial intelligence
(AI) are not only helping to resolve regulatory concerns of meeting privacy
laws by protecting the consumer’s data but are providing a defensive armoury against modern cybercriminals.
PETs allow institutions to
collaborate without using personalised data through a variety of tools that
ensure anonymisation and end-to-end encryption. This allows institutions to
share datasets while ensuring that all personalised consumer data is protected,
and private, meaning laws such as GDPR are still adhered to.
AI can be used to detect patterns
and provide real-time data around transactions that can help institutions
quickly identify anomalous behaviour.
The technology has advanced to
where it can create an “unsupervised model” which helps institutions to
determine fraudulent behaviour by analysing activity that isn’t directly known
to be fraudulent but that acts differently from its peers.
These technologies are readily
available and already play an important role in timely fraud prevention and
detection through analysing large data sets quickly and effectively. However,
there is a common entry barrier due to its complexity and price. Hence further
education and support are needed to help with wider industry adoption.
The Government should act and introduce
an ‘AI investment scheme’. This could allow partners to incorporate these cutting-edge
technologies to mitigate fraud risk, ultimately protecting customers and benefiting
the entire payments ecosystem.
another amazing episode!
this time w/@sardine ceo @soupsranjan
financial fraud and hacking are much scarier in the age of generative ai.
as much as gen ai empowers good actors, it does the same for bad actors.
so, soups is building a platform to counter and prevent them!
he… pic.twitter.com/h0ccckywRe
— This Week in Startups (@twistartups) September 6, 2023
New Protocols Required
New technologies must be
underpinned by mutual trust between partners, and this can be achieved with new
protocols that facilitate safe, effective data sharing between private and
public sectors.
Some existing protocols to stop
fraud have proved to be successful. The current UK banking procedures around
freezing suspicious payments, prevented £55 million in
fraudulent transactions last year.
However, FIs, government agencies,
law enforcement, tech companies and telcos need to do more to create a
framework to help identify suspected fraud across the payments industry.
Further insight on how to share
data responsibly is paramount to successful data collaboration. Increased
engagement between sectors and organizations on controlled data sharing could help
with the detection of sophisticated fraud which one organization can’t see
alone.
To ensure a comprehensive protocol
is introduced, the industry must work to develop and agree on a framework or
platform that serves to share key data collaboratively, protect consumer
privacy, and ultimately reduce fraud.
The Next Steps – Fighting Fraud through Data Collaboration
Current efforts to educate
consumers about fraud detection and reporting are insufficient. As
modern scam tactics become sleeker and more sophisticated, so too must the
prevention methods. Fraudulent methods are diversifying, and consumers must be taught how
to spot and report anomalous activity more efficiently.
As mentioned, the government holds a crucial role in the introduction
of numerous initiatives including:
- Regulatory guidance on responsible data sharing between entities
and on standard data formats. - Allow private sector access for the authentication of government
data. - The creation of a regulator-led forum to facilitate regular
dialogue with the private sector on combating fraud to foster mutual
understanding and build trust. - Work with industry to develop a fraud prevention protocol setting
out circumstances when it is acceptable to override privacy law provisions.
While we still need to see more prosecutions to deter criminals
from committing and recommitting fraud, the industry should also have a ‘For
Your Eyes-Only’ access to law enforcement Suspicious Activity Reports,
to help the public be notified of criminals and the new techniques they are using for their activities.
These initiatives alongside modern technologies in PETs and AI can
allow organisations to build stronger forms of defence, enhance data sharing, and keep
fraudsters at bay. This will not only help protect consumers from the deep
financial and emotional impact of being a victim of fraud but also improve the
safety of all within the payments industry.
Criminals are constantly identifying new ways of
convincing innocent people to be unwitting participants in crimes, and
unfortunately, the number of victims and the size of the losses continue to
increase.
In 2022, the Federal Trade Commission highlighted that consumers in the US lost nearly $8.8
billion to fraud, an increase of more than 30% over the previous year. In the UK, over £1.2 billion was stolen by criminals last year, equivalent to
over £2,300 every minute.
Data exchange between the public and
private sectors is critical in the battle to stifle organised criminals from
committing fraud. However, data sharing is loaded with difficulties in
particular privacy laws and consumer protection, which can slow down attempts
to stop crime as it is being committed.
The rise of cutting-edge technologies such as AI has also diversified
the toolkit of modern cyber-criminals, who
are now using techniques such as AI voice cloning tools to dupe victims.
This has made it even more difficult for the industry to stop.
To combat increasingly sophisticated fraud, modern solutions and
technologies must be adopted by the payments industry to enable effective data-sharing
between the public and private sectors to reduce crime.
Regulatory Capture. When regulators look the other way at the fraud in our financial markets
“…The lawyers at the SEC are not paid well..what they’re looking for is a trophy.
From the SEC they’re looking for something that they can put on Linked In.From that they can get… https://t.co/vm4Hv4CIs8
— kristen shaughnessy (@kshaughnessy2) November 10, 2023
Why Data Sharing Is Critical
Public and private institutions have access to critical data sets
that can help identify fraudulent behaviour and bad actors. Through
collaboration, each can build a fuller, more informed picture of potentially
suspicious behaviour.
Traditionally, transactional data has been used by institutions to
identify fraud as it contains information about parties, dates, amounts and
locations. More modern fraud identification models have developed which provide
more in-depth customer analysis on preferences and purchase history.
By improving the flow of this information between public and
private sectors, institutions can utilise what is already known about a
customer to help determine whether certain abnormal behaviour is potentially
fraudulent.
Unfortunately, key data sets are often siloed within complex
systems that require callouts to third parties. As a result, external
institutions are often unable to reap the benefits that derive from accessing
key information around transactional history and customer information.
Stringent GDPR laws are rightfully put in place to uphold an
individual’s fundamental right to privacy and protect sensitive consumer data. However,
privacy laws can impede efforts to combat fraud as soon as it is happening.
New Technological Solutions
Thankfully, advancements and the
adoption of new privacy-enhancing technologies (PETs) and artificial intelligence
(AI) are not only helping to resolve regulatory concerns of meeting privacy
laws by protecting the consumer’s data but are providing a defensive armoury against modern cybercriminals.
PETs allow institutions to
collaborate without using personalised data through a variety of tools that
ensure anonymisation and end-to-end encryption. This allows institutions to
share datasets while ensuring that all personalised consumer data is protected,
and private, meaning laws such as GDPR are still adhered to.
AI can be used to detect patterns
and provide real-time data around transactions that can help institutions
quickly identify anomalous behaviour.
The technology has advanced to
where it can create an “unsupervised model” which helps institutions to
determine fraudulent behaviour by analysing activity that isn’t directly known
to be fraudulent but that acts differently from its peers.
These technologies are readily
available and already play an important role in timely fraud prevention and
detection through analysing large data sets quickly and effectively. However,
there is a common entry barrier due to its complexity and price. Hence further
education and support are needed to help with wider industry adoption.
The Government should act and introduce
an ‘AI investment scheme’. This could allow partners to incorporate these cutting-edge
technologies to mitigate fraud risk, ultimately protecting customers and benefiting
the entire payments ecosystem.
another amazing episode!
this time w/@sardine ceo @soupsranjan
financial fraud and hacking are much scarier in the age of generative ai.
as much as gen ai empowers good actors, it does the same for bad actors.
so, soups is building a platform to counter and prevent them!
he… pic.twitter.com/h0ccckywRe
— This Week in Startups (@twistartups) September 6, 2023
New Protocols Required
New technologies must be
underpinned by mutual trust between partners, and this can be achieved with new
protocols that facilitate safe, effective data sharing between private and
public sectors.
Some existing protocols to stop
fraud have proved to be successful. The current UK banking procedures around
freezing suspicious payments, prevented £55 million in
fraudulent transactions last year.
However, FIs, government agencies,
law enforcement, tech companies and telcos need to do more to create a
framework to help identify suspected fraud across the payments industry.
Further insight on how to share
data responsibly is paramount to successful data collaboration. Increased
engagement between sectors and organizations on controlled data sharing could help
with the detection of sophisticated fraud which one organization can’t see
alone.
To ensure a comprehensive protocol
is introduced, the industry must work to develop and agree on a framework or
platform that serves to share key data collaboratively, protect consumer
privacy, and ultimately reduce fraud.
The Next Steps – Fighting Fraud through Data Collaboration
Current efforts to educate
consumers about fraud detection and reporting are insufficient. As
modern scam tactics become sleeker and more sophisticated, so too must the
prevention methods. Fraudulent methods are diversifying, and consumers must be taught how
to spot and report anomalous activity more efficiently.
As mentioned, the government holds a crucial role in the introduction
of numerous initiatives including:
- Regulatory guidance on responsible data sharing between entities
and on standard data formats. - Allow private sector access for the authentication of government
data. - The creation of a regulator-led forum to facilitate regular
dialogue with the private sector on combating fraud to foster mutual
understanding and build trust. - Work with industry to develop a fraud prevention protocol setting
out circumstances when it is acceptable to override privacy law provisions.
While we still need to see more prosecutions to deter criminals
from committing and recommitting fraud, the industry should also have a ‘For
Your Eyes-Only’ access to law enforcement Suspicious Activity Reports,
to help the public be notified of criminals and the new techniques they are using for their activities.
These initiatives alongside modern technologies in PETs and AI can
allow organisations to build stronger forms of defence, enhance data sharing, and keep
fraudsters at bay. This will not only help protect consumers from the deep
financial and emotional impact of being a victim of fraud but also improve the
safety of all within the payments industry.
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- Source: https://www.financemagnates.com//forex/fraud-prevention-is-a-priority-public-and-private-sectors-must-come-together/
