With nearly £1.2 billion lost due to both authorised and unauthorised push payment fraud in 2023, financial crimes remained a significant issue.
Despite some reductions in specific areas, fraud remains a persistent and evolving threat, representing over 40% of reported crime in the UK. By understanding the current fraud landscape, we can better prepare and protect ourselves against its damaging effects.
UK Finance has released its annual fraud report, examining the impact of regulatory and consumer behaviour changes across various types of fraud. We have attempted to distil some of these findings below. The full fraud report can be found here: Annual Fraud Report 2024.
Financial and Emotional Impact
The financial repercussions of fraud in 2023 were substantial, with nearly £1.2 billion lost across almost three million cases. This staggering figure highlights just how common and damaging the economic impact of fraud truly is.
Fraud doesn’t just steal money, however. It also has a devastating impact on the emotional well-being of victims – some of whom have lost their life savings. Fraud is a deeply manipulative financial crime that can cause severe emotional distress.
“Harrowing case studies we often read about in the media. It is only by stopping fraud happening in the first place that we will truly protect people.” – UK Finance.
Victims often experience significant psychological harm, feeling betrayed and violated, and often mistakenly believing that they are the ones at fault. The emotional impact is particularly strong in cases of romance fraud. Victims may have spent weeks or months speaking with their scammer, truly believing they have an emotional connection.
The combination of financial loss and emotional trauma makes fraud a particularly nasty crime. It disrupts lives, undermines trust, and leaves lasting scars on its victims.
Prevalence and Methods of Fraud
Fraudulent activity accounts for over 40 per cent of reported crime in the UK.
In 2023, Authorised Push Payment (APP) fraud incidents rose significantly, reaching 232,429 cases—a 12 per cent increase from the previous year. This surge highlights the growing sophistication and adaptability of fraudsters. Furthermore, this number only accounts for reported incidents. The true impact is far greater, with many victims choosing not to report their loss due to embarrassment or fear of judgment.
“A recurring theme in this year’s data is, once again, this shift towards the compromise of personal data, and social engineering to take over accounts or trick consumers into making payments.” – UK Finance.
By compromising personal and financial data, criminals trick victims into making payments or providing enough information to gain control of accounts. This manipulative approach includes impersonation scams, where fraudsters pose as trusted entities, and purchase scams, where they deceive victims into paying for non-existent goods or services.
The focus appears to have shifted towards lower-value, higher-volume attacks, reflecting fraudsters’ evolving strategies to maximise their gains while minimising the risk of being caught.
Technological and Regulatory Responses
Technological advancements and regulatory measures are being deployed in response to the increasing threat of fraud. The rise of artificial intelligence (AI) and machine learning has proven to be a double-edged sword.
“As fraudster attacks begin to leverage AI, the volume of customers fooled will increase, meaning more fraudulent payments will be processed, therefore fraud rates will increase.” – UK Finance
While AI technologies can enhance security measures, they also provide fraudsters with powerful tools to create convincing and sophisticated scams en masse. The ability of AI to create realistic images, scripts, videos, and voices in seconds has made it easier for fraudsters to trick even tech-savvy and fraud-conscious victims.
Regulatory bodies like the Payment Systems Regulator (PSR) are stepping up their efforts to combat fraud. The PSR’s impending policies aim to protect the most vulnerable and ensure financial institutions take greater responsibility for preventing fraud. These measures include mandatory reimbursement for victims of APP fraud, which is expected to increase the reimbursement rates from the 62 per cent reported in 2023. Such regulatory changes are crucial for holding banks accountable and ensuring victims receive timely compensation.
Fraud Prevention and Recovery
The findings from 2023 paint a stark picture of the current fraud landscape, characterised by significant financial losses, emotional trauma for victims, and increasingly sophisticated criminal tactics. To effectively combat fraud, a comprehensive approach is essential.
“The tide of criminal activity targeting consumers, their means of payment and personal data shows little sign of abating, according to the latest fraud data reported by UK Finance members.” – UK Finance
Individuals should remain vigilant, safeguarding their personal and financial information and being wary of unsolicited communications that may be fraudulent. Financial institutions must continue innovating and employing advanced technologies to detect and prevent fraud while collaborating closely with regulatory bodies to ensure robust consumer protection.
Regulatory efforts, such as those spearheaded by the PSR are vital in creating a safer financial environment. By enforcing stricter measures and ensuring that victims are reimbursed, these initiatives help to mitigate the impact of fraud and provide much-needed support to those affected.
Banks and payment service providers must safeguard their clients using their expertise and data for fraud detection. This means taking proactive fraud prevention measures to stop these crimes before they are allowed to happen. By utilising their knowledge and resources, they can effectively protect their customers from falling victim to scams. Financial institutions must stay vigilant and stay one step ahead of fraudsters.
Furthermore, when banks fail to reimburse defrauded clients, recovery specialists like CEL Solicitors are on hand to offer advice and support and, ultimately, to help get the victim’s money back.
