UK citizens need to stay on high alert, as financial fraud climbs to the highest risk level in the current tough economic environment and people will be targeted by an increasing number of scams, according to 2023 financial crime predictions from the fincrime practice at Valcon, a leading European consultancy specialising in data, technology and people.

Phishing attacks, phishing scams, romance scams and in this era of high inflation, electricity and gas scams will be on the rise in 2023. There will also be an uptick of internal fraud – where staff seek to defraud their employer – and so called ‘friendly fraud’, where customers seek to defraud their own banks. Sharp economic downturns result in more risk-taking and that includes risk-taking that crosses lines into financial crime – we will see this in various forms throughout 2023. Valcon’s financial crime predictions for 2023 are:

FRAUD PREDICTIONS

  • Scams: scams to defraud unsuspecting victims remains at the highest level of risk including phishing attacks, romance scams and given the cost of living crisis, we expect to see a rise of gas and electricity based scams.
  • Internal fraud: will be on the rise but may take longer to uncover. Typically, staff will take two approaches – either a massive one-off strike for a large amount of money and then run, which is quicker to identify, but we anticipate a rise in people conducting lower-level fraud which is harder to detect. The increase in ‘buy now pay later’ (BNPL) will push people into credit and result in desperate action.
  • Friendly (Customer) Fraud: increased pressure due to economic reasons, will lead to more fraudulent chargeback claims.MONEY MULE PREDICTIONS
  • Money mules: the incidence of the use of money mules (where people are either unwittingly used to launder money, or are paid by fraudsters to use their bank accounts to launder money) will increase as people become more desperate to find funds to meet energy bills and cost of living increases. Criminals have traditionally targeted students, people who are on benefits and low earners to become money mules.

SANCTIONS PREDICTIONS

  • Ukrainian conflict: the sanctions regime will continue to be tough in 2023 with the continued conflict between Russia and Ukraine and the added complexity of the new oil cap and related sanctions.
  • UBO processes and controls: the focus on UBOs (ultimate beneficial owners) will remain high in 2023 as financial institutions continue to keep pace and demonstrate they have good controls and are able to identify connections to sanctioned individuals and entities.
  • FCA involvement in sanctions: the FCA has announced recently that it will increase the amount of visits to financial institutions (FI) in 2023 to test their data quality and the effectiveness of their sanctions controls, so FIs need to be on the front foot and get prepared.

REGULATORY PREDICTIONS

  • FCA Business Plan 2022/23: the FCA has highlighted it wants to become more ‘data led’ in 2023, putting more emphasis on the analytical tools the regulator has built using synthetic data. The aim of this is to slow the growth in automated push payments and fraud losses and slow the growth in investment fraud victims and losses
  • EU Centralised AML Agency (AMLA): a new regulatory body will be established in 2023 seeking to issue direct supervisory powers from 2026.
    7AMLD: 7 AMLD – the new iteration of the money laundering directive – or something even more stringent is on the horizon with AMLA – unification of AML (anti money laundering)/KYC (know your customer) regulation in every EU state.
  • Economic Crime and Corporate Transparency Act: currently working its way through the legislative process, the Act notably includes proposed amendments to the reporting thresholds under POCA (£250 to £1000), the ability of regulated firms to share information relating to money laundering and a new rule allowing the ringfencing of “tainted” funds.
  • Cash: there will be prohibition of cash purchases over €10,000

 

Consumers and financial institutions will be embattled in the New Year, facing a tsunami of fraud and other financial crime. In times of financial hardship, as with the current cost of living crisis, more people are driven to look for elicit sources of income, so we see trends like internal fraud, friendly fraud and a range of scams emerge. Scammers are clever and often one step ahead – fooling people is their area of expertise, so people have to be on their game.

 

If you would like to speak to someone at Valcon about your financial crime programme, please get in touch: [email protected]