A new study by the Payments Association shows that criminals are misusing cross-border transactions and weak global regulations to their advantage.
The trade body’s study reveals that criminals are committing Authorised Push Payment (APP) fraud by exploiting the speed and complexity of international payments, often using UK-based accounts to hide their activities.
APP fraud happens when someone is tricked into willingly transferring money to a scammer, a serious issue the UK has faced in recent years. It is estimated that criminals stole an estimated £580m in just the first half of 2023.
Tony Craddock, Director General of the Payments Association, said: “The UK’s Faster Payments system was the first of its kind, but was not designed to protect us from today’s super-smart fraudsters.
“As a result, although it allows rapid fund transfers, it has become a focal point for international criminals, because faster transactions make it difficult to halt fraudulent payments before funds disappear into networks of ‘money mules’ worldwide.”
As Craddock points out, the quick and easy nature of global payment systems allows criminals to exploit gaps between jurisdictions, complicating fraud detection.
The white paper also highlighted that inconsistent global regulations are a significant concern, as varying standards for KYC and anti-money laundering (AML) protocols allow fraudsters to exploit differences between regions.
Additionally, the paper stresses that the industry cannot afford to wait for regulators and standardised rules and must use AI and machine learning technologies to actively detect and prevent fraud.
However, this isn’t a quick solution as the technology is still being developed. Although most financial institutions now use artificial intelligence (AI) to help catch fraud, the technology isn’t foolproof and misses some fraudulent transactions.
Following these findings, the Payments Association calls for greater collaboration among financial institutions, regulators, law enforcement and technology providers to share data, intelligence and best practices.
The report uses Australia’s approach as a model, where a collaborative framework between banks, law enforcement and technology providers has significantly improved fraud detection for the country.
Gary Palmer, CEO and Founder of Payall, commented: “APP fraud is a growing issue in cross-border payments. If we’re to protect consumers and defeat fraudsters, as well as preserve business models, purpose-built fraud prevention software is needed to address vulnerabilities as well as improved data sharing on both sides of the transaction to aid investigations.”
APP fraud has become a major talking point in British payments over the past year, largely due to the Payment Systems Regulator (PSR) introducing new rules around reimbursement in October.
The Payments Association played a key role in reducing the cap on reimbursement from £415,000 to £85,000, though it has argued this should be reduced even more to £30,000.
