Keeping crooks out of finance

written by Brian Mairs on 09/11/2010

Every year the BBA’s conference on financial crime gets bigger and bigger – both in terms of the audience and the agenda. Economic downturns tend to provoke criminals to find new and more creative ways of defrauding people, picking particularly on the easiest prey of the old and desperate.

So this year we have been hearing from a range of speakers about new threats to banks and their customers, or old threats in new guises.

Margaret Cole, the Financial Services Authority’s director of enforcement, put it neatly when she spoke of our shared responsibility for "keeping crooks out of finance". Success is hard to measure, as it is impossible to quantify the amount of possible theft that has been avoided by counter-fraud activity. It is also not easy to publicise without giving ideas to other would-be fraudsters. But she did offer praise to the industry for working with the FSA to identify and root out fraud attempts, and for tightening their scrutiny of suspicious activities.

There are some general themes emerging that it is worthwhile to share.

First the growing prevalence of boiler rooms – schemes which sell worthless shares with elaborate promises of future growth. The FSA has scored some notable successes lately, and publicity about these schemes has increased greatly. But of course the most dangerous ones are the most plausible. Banks are working with the FSA to identify unusual transactions from customers which might involve such schemes, without interfering with customers’ right to spend their own money. This can be a challenge: will the fraud victim listen to words of caution from the bank or the assurances of a credible conman?

The second clear theme is mortgage fraud. There had been an assumption that more such frauds would be uncovered, as more and more borrowers default. But for one thing the economy has been more benign than expected, and therefore defaults have not reached the high levels expected. Nor have there been as many instances of borrowers overstating their income to get on the property ladder: banks carry out ever more rigorous checks on borrowers, and will focus on any unsubstantiated claims.

And many others were touched on throughout the day – customer data theft, market abuse, money laundering and even old-fashioned bribery, making a re-appearance in the guise of “facilitation payments” for cross-border deals.

The clearest message from the day is that everyone in the City – from the banks to the police and the regulatory authorities – is committed to making it ever harder for criminals to target their victims through the financial system.