Is AI a game-changer in combatting fraud?
“Without real-time collaboration between banks, law enforcement, and tech platforms, preventative tools alone cannot be effective,” says Martin Kenney.
Fraud continues to be one of the most pressing challenges for UK financial institutions, law enforcement, and regulators.
Last year criminals stole a staggering £1.17 billion ($1.6 billion) through fraudulent activities. These figures are reflected globally; the problem is not unique to the UK.
The threat posed by fraud continues to evolve as fast as the technology enabling it. While financial institutions have toiled to do what they can to prevent these crimes, the reality is that current protocols, hindered by outdated legislation, are too slow to prevent criminals from moving stolen digital funds before law enforcement can intervene.
As a lawyer specializing in investigating fraud, corruption, and overseeing the resultant asset recovery processes, I know first-hand the urgent need for real-time intelligence sharing and legislative reform to fight fraud and economic crime in the digital era.
Fraud is not just a financial nuisance: It is a systemic threat that funds organized crime and erodes trust in the wider financial system.
Ben Donaldson, managing director of economic crime at UK Finance, recently said: “Fraud continues to blight this country [the UK] … This causes severe harm to individuals, society and our economy as the stolen money goes to serious organized crime groups, both here and abroad.”
Fraud is not just a financial nuisance: It is a systemic threat that funds organized crime and erodes trust in the wider financial system.
One of the most pressing challenges in combatting digital fraud is speed. Criminals can move funds in a matter of minutes, while law enforcement and financial institutions are constrained by slow processes and outdated legislation.
Currently, these institutions must rely on systems such as Suspicious Activity Reports (SARs) and coordination through law enforcement channels. These protocols, while crucial, are often too slow to respond to real-time fraudulent activity. By the time a SAR is processed, or an account freeze is issued, funds will have already been transferred overseas or into complex chains of digital wallets, making recovery far more difficult.
One of the most pressing challenges in combatting digital fraud is speed.
Quoted by UK Finance, Gadi Mazor, CEO of cybersecurity firm BioCatch, agrees: “Financial institutions, governments, law enforcement and regulators must collaborate and share intelligence in real time if we hope to meaningfully reduce fraud losses.”
Conflicting legislation is an overriding problem, hindering any real-time and speedy response, even in the EU (one would expect systems and information to flow unhindered; they don’t). The reality is that crooks are aware of all this and have identified friendly jurisdictions where they can move funds quickly and efficiently, safe from prying eyes.
Technology can help in this battle, but only if coupled with real-time intelligence. It is true that banks and other financial institutions have made significant strides in developing systems to prevent fraud. Advanced security systems, including behavioral biometrics, AI, and multi-factor authentication, have all been effective – to a point.
Indeed, UK Finance’s 2024 report noted that 67p in every £1 that fraudsters attempted to steal was successfully blocked. Yet despite these advances, fraudsters continue to exploit the human element crucial to so many frauds.
Criminals are quick to adapt to technological countermeasures, too. Remote purchase fraud, phishing, and online scams are surging. Without real-time collaboration between banks, law enforcement, and tech platforms, preventative tools alone cannot be effective.
By the time law enforcement responds, the window to recover funds often closes.
A recurring theme in tackling fraud is that law and regulation lag behind criminal innovation. Current legislation does not facilitate the rapid sharing of intelligence or the ability to freeze digital assets quickly. By the time law enforcement responds, the window to recover funds often closes.
So the problem is that at the moment there is no single solution to digital fraud. However, if countries can agree on protocols that enable the establishment of real-time conduits to exchange intelligence and evidence quickly and efficiently, then we will at least be on the right track.
I appreciate that some will say that these intelligence-sharing routes are already open. But the reality is that whatever format they currently take, they are ineffective. I also acknowledge that human resources are an issue. Without people, technology is of no consequence. As incredible as AI is, without boots on the ground, it remains impressive but nothing else.
Are we going to be satisfied with preventing some fraud? Or, having prevented it, are we going to go after the culprits and bring them to book? Without prosecutions there are no consequences for fraudsters, which means there is no deterrent for them either. Absent such a deterrent, crooks will simply carry on exploiting whatever weaknesses they can identify. To disincentivize them, we need more trained investigators and prosecutors.
Only legislation will turn the taps and allow intel to flow and empower real-time action to frustrate the fraudsters.
That in turn will require nation-states to implement new legislation. There are a lot of organizations that are protective of their information and their position, including financial institutions and law enforcement. Only legislation will turn the taps and allow intel to flow and empower real-time action to frustrate the fraudsters. Existing laws must be tweaked, or new laws drafted, to keep pace with the speed of digital crime.
But without investment in people, we will continue to see fraud increasing and remain the most common reported crime, and most alarmingly, the crime least investigated.
