It’s no secret that fraud is one of the most pressing threats to financial institutions, exacerbated by stormy economic conditions. The most recent fraud report by UK Finance calls attention to post-pandemic unauthorised and authorised fraud trends, underlining the continuance of social engineering schemes which manipulate victims into forfeiting sensitive details or transferring funds. Overall, the report puts UK fraud losses at an outstanding £1.2 billion for 2022, which is equivalent to over £2,300 every minute.
These high fraud rates correlate with increasing regulatory expectations for firms to remedy weaknesses in their systems and controls. Most recently, the Financial Conduct Authority (FCA) emphasised fraud as a priority area in a Dear CEO letter outlining immediate actions for financial institutions to take. These include the need to review risk appetite statements to ensure they adequately address the risk of fraud to customers, maintaining appropriate customer due diligence controls to prevent accounts from receiving proceeds of fraud, and regularly reviewing fraud prevention systems and controls to ensure effectiveness.
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To address recent regulatory guidance on fraud for financial institutions, FINTRAIL has increased the scope of our fraud assessments as part of our standard audit offering. To find out how we can support your audit process and associated fraud controls, get in touch with our team.
This priority area corresponds with the UK government’s express inclusion of fraud as part of the most recent Economic Crime Plan and the launch of its fraud strategy, which is one of the most progressive in the world. The focus on fraud is not isolated to the UK alone; the United State’s Financial Crimes Enforcement Network (FinCEN) has also made it clear that combating fraud is a top priority, with the Monetary Authority of Singapore (MAS) also funnelling resources into anti-fraud initiatives. In view of this, we can expect further regulatory attention and enforcement concerning fraud.
As fraud remains a huge and growing financial crime threat on a global scale, regulators will not only require firms to have robust fraud controls as part of an effective anti-financial programme but also increase their scrutiny of regulated entities in this area. Having an appropriate fraud strategy and mitigation measures in place directly translates to effectiveness in anti-financial crime controls, meaning financial institutions should ensure and fortify their framework.
In light of this fraud threat landscape and the associated regulatory expectations, FINTRAIL has increased the scope of fraud assessment as part of our standard audit offering, and also created a fraud audit checklist to help ensure that your anti-financial crime framework is primed and prepared for the risks it faces.
Download your copy of our Fraud Controls Checklist:
What areas does the checklist cover?
Risk Assessment and Risk Appetite
Governance and Management Information
Policies and Procedures
Customer Due Diligence
Enhanced Due Diligence
Anti-Fraud Systems and Controls
Customer Screening
Transaction Monitoring
Reporting and Information Sharing
Training and awareness
Assurance and Audit
Horizon Scanning