Preventing Fraud in the Financial Markets – An Ever Expanding Challenge?

Ms Bowe noted that although the primary issue for victims of fraud was, quite naturally, the funds placed at risk, the fracturing of trust can in many ways cause greater and more far-reaching consequences for the market.  Ms Bowe emphasised that prevention of fraud in financial services will only be possible through partnership and collaboration between the market and the various investigative and enforcement agencies, and identified a number of strategies that are being implemented to respond to the challenge:-

• The introduction of the Banking Protocol Rapid Response Scheme to promote staff training to identify warning signs of fraud. The scheme is said to have prevented £54.7m in fraud.

• The FCA and National Crime Agency’s 3-day investment fraud tech sprint to test cross agency collaboration and development of solutions.

• The FCA’s guidance to clarify the responsibilities for firms and ‘finfluencers’ who use social media to share financial promotions.

• The development of general customer awareness campaigns through ScamSmart and similar initiatives which encourage customers to review online warnings prior to investing

• Initiatives to ensure that app stores, such as Apple and Google, are on side to request that crypto apps which breach financial promotion rules are removed.

It is evident from Ms Bowe’s speech that a great deal has already been done between regulatory agencies to confront the ever-expanding scale and severity of fraud in the payments sector of the banking market.  The new failure to prevent fraud offence and anticipated guidance (see our commentary here) and the Consumer Duty are central to those efforts.

However, it is questionable whether the FCA and other relevant agencies are sufficiently nimble to ensure the regulatory framework and market behaviour are able to respond to the constant evolution in fraudulent activity.  The challenge to the integrity of the payments sector of the banking market is significant:  £1.17bn was taken from people through payment scams in the UK last year; fraud comprises 36% of all crime reported in England and Wales, with 3.2m incidents in the year to March 2024 alone.

Ms Bowe concluded her speech by observing that “[t]ogether we have the chance of protecting people from that loss of money, that loss of confidence, that feeling of helplessness that comes from being scammed”.  So far so sensible, and the FCA’s efforts to collaborate with other agencies is undoubtedly commendable.  However, it remains to be seen whether the FCA and other agencies will be adequately resourced to take their ‘chance’ to protect people, or whether, as seems more likely, participants in the payments market must take their own chances.