ARTIFICIAL INTELLIGENCE
For your eyes only Stuart Newey, Head of Client Service & Delivery at Coutts, and Mark Dabbs, Fraud Systems and Analytics Manager at Investec, explore how AI can help private wealth managers combat crime Most outsiders probably imagine the risk department of a private bank to be staffed by stiff-collared compliance teams who’ve only just upgraded to ballpoint from quill pens. Yet the reality couldn’t be more different. Because here is where some serious international crime-fighting takes place. Meet the 007s of wealth management, whose high-tech mission is to protect their high-net worth individual and corporate clients from villains that are every bit as shady as Blofeld and just as slippery. They have, after all, a lot to lose: not just cash but something much more valuable – trust. As banking becomes more instant, more convenient and more digitised, fraud has been steadily increasing. Scams take place in seconds, and the culprits slip away into the shadows so fast that law enforcement is struggling to keep up. The situation has only worsened during lockdown, so much so that experts predict that, instead of an anticipated eight per cent decrease in payments fraud in 2020, firms should now prepare for a 10-15 per cent increase. Across all financial products, fraud rates in the UK rose by 33 per cent in April, compared with previous monthly averages, according to data collected by Experian and fraud prevention service National Hunter. And the Investment Association released figures in July that showed clients of UK investment managers had lost approximately £4million since the start of the pandemic to organised criminals who faked their products, in particular investment bonds, promoting them through hoax price comparison websites and cloning brands to produce counterfeit documentation. Research from financial services firm Canada Life, in May, found that 5.2 million
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TheFintechMagazine | Issue 17
this could grow,” Investec said. It added people in the UK had fallen victim to, that businesses and their financial or knew someone who had been partners should relook at the validation duped by, a financial scam since the process to ensure accuracy and security. beginning of the virus outbreak. We humans remain the weakest link, In the US, 22 per cent of Americans have particularly during a stressful situation reported being targeted by fraud related like COVID-19. to COVID-19. More than $1.2million has “With COVID, you’re under a stress been stolen in COVID-19-related schemes scenario, people will either make mistakes in Canada. The list goes on. or, because they are in a rush, will do Fraud became the single biggest crime things which are ill-advised,” says Stuart in the UK in 2019, accounting for 35 per Newey, head of client service and delivery cent of all reported incidents – but combated by less than one per cent of law at UK-based private bank Coutts. “For example, your CEO has told you this, so, in enforcement officers, leading director a very hierarchical firm, you’d think ‘well, if general of the National Economic Crime the boss says I need to pay it, I need to pay Centre, Graeme Biggar, to admit to the it’.” Except, of course, it’s not the boss. BBC last month that the approach taken In the words of Mark Dabbs, fraud thus far has failed online banking users. systems and analytics manager at He said government, industry and police Investec: “Traditional fraudsters are using need to ‘change the way we are thinking the same fraud modus operandi, about fraud’ by putting Traditional just rebranding it with COVID.” greater emphasis on fraudsters are He talks about an new industry data sharing between using the same fraud emerging, ‘fraud as a service’, agencies and banks, modus operandi, using the same technology while encouraging they’re just rebranding available to financial institutions the latter to ‘design to give bad actors more out’ attacks. it with COVID sophisticated tools to improve His concern is shared Mark Dabbs, their scams. by wealth management Investec We have to It’s self-evident group Investec. protect the that private wealth Alarmed at the sudden managers need to spike in fraud attempts by April, it consumer from work harder than issued a detailed warning about making ill-advised online fraud and phishing scams, choices to start with ever to protect their clients from harm and in particular the risks associated Stuart Newey, – even as they struggle with authorised push payments Coutts to deal with the where third parties intercept emails pressures of lockdown themselves. And, or invoices and alter banking details in this scenario, artificial intelligence to divert funds into a fraudster’s account. (AI) is increasingly coming to the fore, “Across the banking industry, the using superhuman power to scan number of fraud cases where the account insane amounts of data in real time for holder transferred funds to an suspicious patterns of activity and unintended recipient grew by 69 per cent alerting managers to threats. On top of within the last year and, given the new that, says Newey, ‘we have to concentrate channels being used and unpatched on how we protect the consumer from home networks being used for corporate making ill-advised choices to start with’. communication [during the pandemic],
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