Reducing fraud losses: How banks and fintechs can transform APP fraud recovery
Fraudsters don’t rely on technical loopholes—they often exploit human vulnerabilities. APP fraud, in particular, is a good example of this in action. Difficult to detect and prevent because it leverages social engineering to manipulate victims, the banking industry’s trust, systems, and practices are used against itself.
As criminals evolve their methods to deceive even the most vigilant institutions, the question is: what can financial institutions do to fight back?
The answer lies in collaboration. No financial institution can beat fraud in isolation. But by fostering real-time communication between institutions and leveraging innovative tools, the industry can disrupt fraud schemes before they spiral out of control.
This blog contains actionable advice from Ester Eggert, Head of Product at Salv, on how financial institutions can use collaboration and technology to transform their fraud recovery efforts. Taken from the e-book by Salv, Thistle Initiatives and We Fight Fraud, Inside the Scam: How APP Fraud Fits into the Fraudsters’ Playbook, was created with input from 30 fincrime professionals at a roundtable event.
How the industry currently collaborates to fight fraud
Collaboration usually takes place through fincrime working groups and face-to-face meet-ups, giving fincrime practitioners the space to discuss and reflect on what they are seeing.
These conversations result in successful investigations and newfound fraud patterns, but they happen sporadically.
Then, everybody returns to the office, and the barriers go back up. There’s no seamless, integrated way to facilitate these conversations on an ongoing basis. Traditional methods like emails, calls and meetings are often too slow to combat sophisticated criminal activity.
APP fraud doesn’t happen in isolation. In any scam, multiple financial institutions are involved. However, investigators can only see the part of the puzzle relating to their company without visibility of the broader network.
For more tips on protecting against APP fraud, get the e-book from Salv, Thistle and We Fight Fraud today.
Fincrime teams need to be able to join the dots earlier, communicating instantly with other institutions in the chain based on suspicion. Suspicion is usually raised during the screening process when onboarding a new customer or by an alert from the transaction monitoring system.
Then, fast action can be taken, such as halting transactions and freezing accounts. Since the onus is now on financial institutions to refund victims, recovery through collaboration will help limit fraud losses.
A unified approach to investigations
Initiated based on suspicious activity and supported by real-time communication, collaborative investigations give all financial institutions in the chain the best chance of recovering stolen funds. During a collaborative investigation, the financial institution that initiated the payment will inform the receiver of a suspicious transaction (via secure communication).
Technology solutions (like Salv) enable these secure communications to take place in compliance with all local and European data privacy laws and regulations. Once the industry collaborates effectively, as Nicola pointed out in the introduction, we can tackle APP fraud more effectively. Act on suspicion, identify stolen funds as they move between banks and fintechs, then return them to the victim’s bank before they leave the financial system.
For more tips on protecting against APP fraud, get the e-book from Salv, Thistle and We Fight Fraud today.
Making collaboration an everyday practice
The industry’s current processes do not support the level of collaboration needed to enable better APP fraud recovery. However, platforms that unify fincrime teams through collaborative investigations and real-time intelligence sharing exist and can be used to make collaboration an everyday practice.
By integrating collaboration into routine investigations, financial institutions can strengthen their ability to act quickly on suspicious activity, recover stolen funds before they exit the financial system, and protect their customers from further harm.
