Open Banking: Who are you opening the door to

Open Banking: Who are you opening the door to?

22 Mar 2019

Why your customers could be the downfall of Open Banking – and how data sharing can save it.

Lee D’Arcy, director of engagement at Cifas, at the UK’s fraud prevention service spoke to Open Banking Expo Magazine.


One fraud hides a multitude of crimes

In the world of business, it’s rare to find a situation where sharing information between companies results in a competitive advantage. But tackling fraud and financial crime is exactly that situation. And as we move into the brave new world of Open Banking, it will become more vital than ever.

The key to succeeding or failing in the era of Open Banking is knowing your customer: who are you opening the door to? Get it wrong and the repercussions can stretch far beyond a single fraudulent transaction. Contrary to popular belief, transaction fraud is rarely a standalone crime – it’s frequently indicative of the presence of other fraud or frauds.

Authorised Push Payment (APP) frauds are a good example of this. APP frauds involve a scammer tricking a victim into transferring their money into the account of a fraudster – frequently, and ironically, by pretending to be their bank and asking them to transfer money to protect it from a fake fraud threat. But that’s not the only crime being committed. ‘Money mule’ accounts – illegal in themselves – are often the recipient accounts of the funds. These form part of wider money laundering schemes that can fund anything from further scams to the drugs trade to human trafficking.

Open banking – changing the game?

As a keen sporting fan, I have watched many sports – tennis, cricket, rugby – introduce technology to enhance the game. In the same way, the world of banking and payments is following suit. The world of Open Banking reflects the consumer’s new way of engaging with financial services, and organisations’ use of technology to compete for business, from app-based accounts to payments.

But just as the fundamentals of sports remain the same, no matter what technology is introduced, the same is true for the financial sector. This is especially the case when it comes to the risk of fraud. With impersonations, identity theft and synthetic identities posing an increasing threat, data sharing is still the nature of the game when it comes to effective fraud prevention. It’s now enhanced with increasing sophisticated technology, such as machine learning and artificial intelligence, that not only wins customers, but protects them.

And with Cifas members increasingly using machine learning and artificial intelligence to interpret and use our data, it’s no wonder they saved over £1 billion in prevented fraud losses in 2017.


Cifas – essential in the Open Banking era

Cifas has over 500 members – including all the major banks such as HSBC, Lloyds, Barclays and Santander as well as challenger banks such as Atom, Starling and Tandem bank. They access the UK’s largest fraud risk database for first and third-party fraud, as well as our database of employees who have committed internal fraud. Fraudsters operate across the sectors, not just finance. Insurers, retailers, regional and national government, law enforcement, charities and many more contribute to an unparalleled source of robust and reliable data that grows in value and utility every single day.

Alongside data, they share intelligence – what fraud patterns they see, what products are being targeted – and use this to inform and develop their fraud and financial crime prevention strategies to protect their business, clients and customers. They receive the latest statistics, trends and alerts from Cifas’ expert analysts who continually monitor the data and intelligence received.

Cifas is continually evolving to adapt to upcoming and recently-implemented regulatory changes. These include Confirmation of Payee and the new option for victims to complain to the receiving payment service provider, meaning that customer due diligence is as vital as ever.  For example, new alerts tell members in real time when other organisations have seen activity that involves shared customers and tells them how to act to stop potential fraud.

Open Banking, the new era that both brims with opportunity and is pitted with threats, makes Cifas – the first and the leading UK fraud prevention service – perfect business sense.