By Chris Lewis, Head of Consultancy at Synectics Solutions  

Last week, millions watched a video of Tom Cruise on TikTok in which he tells audiences he’s going to show them some magic by making a coin disappear. He promises it’s the real thing. Except, it isn’t. The video is a “deepfake” – or fake video – which has generated millions of views and shares across social media from people who believe it’s the real deal. This highlights that deepfake technology is advancing much faster than most people realise.

Even with less sophisticated methods than deepfake technology, it’s all too easy for people to create false digital personas online. Cybercriminals are capitalising on this. Social media gives people the opportunity to commit large scale fraud and target vulnerable demographics through their highly optimised advertising engines.

According to ONS data, around half (54%) of fraud incidents in the year ending March 2019 were cyber-related. Cybercrime is also vastly underreported with more recent statistics indicating only a fraction of fraud and cybercrime offences occurring in the UK are being reported to the authorities, according to ONS estimates from its new telephone-operated Crime survey for England and Wales (TCSEW). The challenge is significant – but what can banks do to tackle the rise in cybercrime and protect both themselves and their customers?

What’s being done to combat cybercrime?  

Bigger picture, there is an acknowledgement that there needs to be change at policy level – but the question remains whether policy changes are going far or fast enough.

At grassroots level, the US Treasury described the UK as a “higher risk jurisdiction” in the FinCEN files comparing us to notorious financial centres “such as Cyprus”. This has accelerated reforms to Companies House to further clamp down on fraud and give businesses greater confidence in transactions. Suggested reforms include the requirement of directors being unable to be appointed until their identity has been verified.

Online harms 

The government’s white paper on online harms is a world-leading package of online safety measures to make companies more responsible for their users’ safety online, especially children and other vulnerable groups. Despite this, it only scratches the surface of cyber-enabled crime and potentially warrants urgent revision whilst the legislation is yet to be passed (nearly two years after it was first proposed).

Online platforms, such as social media sites, need to take responsibility for their role and reduce the widespread issue of generic online anonymity enabling disinformation. The issue of generating and managing false and misleading information is now plaguing those responsible for managing risk and combatting fraud across financial services. It’s also having life-changing consequences on consumers who fall victim to fraud because of disinformation.

What banks are doing 

To tackle this issue, banks recognise they need an IT ecosystem which gives them a holistic view of data. Many have the technology – or are aiming to adopt technology – that makes integration possible and allows them to make real-time decisions based on data services, regulatory compliance, fraud risk and digital identity.

Fundamental to enabling these digital-first journeys is a full understanding of the customer lifecycle and the introduction of appropriate levels of friction where there is a risk of fraud or wider financial crime.

With regulatory considerations being thrown into the mix, the issue of tackling digital onboarding is growing in prominence in the financial services sector. It’s clear – those that have invested in technology and better customer experience flows, such as challenger banks like Starling, Monzo and Revolut, are winning considerable market share over those that have either chosen not to invest to the extent required or delivered only partial digital transformation.

Barriers and challenges for banks 

Digital-first customer management is still a new area for many and technological inflexibility – combined with the size and scale of implementation – is still holding financial services back. Banks need to be agile enough to protect themselves and their customers as cyber criminals are advancing at pace.  It’s not all doom and gloom however, and the existential crisis that Covid-19 created has had the side effect of pushing digital transformation up the agenda industry-wide.

Three ways forward 

Considering the way forward, there are three areas banks can look at immediately to help tackle cybercrime:

1. Banks can leverage specialist suppliers to protect against digital risk vectors and use their expertise and experience.
2. Banks can utilise wider data sources, such as counter fraud data, to conduct wider customer due diligence during pre-suspicion screening activity. To develop a robust risk model, banks could save more money and protect more people if this data wasn’t siloed between fraud and financial crime teams.
3. With better access to data, banks could get rid of paper-based and manual systems in favour of machine learning for long-term improvements in risk-based decisioning.

To some degree, these are sticking plaster solutions as the real change will be driven by industry-wide transformation and new policies. Consumers and the banking sector need to see practical action from policymakers to drive this change and truly tackle the issue of cybercrime.