Strengthening the Front Lines: FCA Calls for Robust Anti-Fraud Measures & Improved Customer Support

In the ever-evolving landscape of financial transactions, the Financial Conduct Authority (FCA) has recently released a review highlighting the need for firms to fortify their anti-fraud systems and enhance the support provided to victims of fraud. While commendable examples of good practices were identified, the FCA expressed disappointment with the inadequate support extended to customers who fell prey to fraudulent activities.

The statistics are alarming; in the first half of 2023, over 116,000 individuals reported falling victim to Authorized Push Payment (APP) fraud in the UK. This form of fraud involves tricking individuals into transferring money to a fraudulent entity posing as a legitimate payee. With economic pressures on the rise, and fraud methods becoming increasingly sophisticated, the FCA underscores the critical importance of firms continuously evaluating and fortifying their approaches.

The FCA's comprehensive review brought several key issues to light:

1. Strengthening Fraud Detection Systems: Firms are urged to enhance their systems dedicated to detecting and preventing fraud. The evolving nature of fraud tactics demands constant vigilance and adaptation.

2. Consumer-Centric Focus: There is a notable lack of emphasis on delivering positive consumer outcomes in many firms. The FCA emphasizes the need for firms to prioritize consumer welfare in their approach to fraud prevention and response.

3. Improved Support for Victims: Some firms were found lacking in the support provided to victims of fraud. The FCA calls for better assistance, understanding, and responsiveness in dealing with individuals who have fallen victim to fraudulent activities.

4. Enhanced Complaint Handling: Complaint handling, including response times and clarity in communication, was identified as an area needing improvement. Customers reported receiving decision letters that were unclear, confusing, and occasionally included unhelpful or accusatory language.

5. Consideration of Customer Vulnerability: Firms were found to not fully consider customer vulnerability characteristics when making decisions about fraud claims and complaints. The FCA emphasizes the importance of a more nuanced approach that takes into account individual customer circumstances.

The FCA is already collaborating with firms to strengthen their approaches based on these findings. It expects all payment service providers to utilize these insights to enhance their capabilities in detecting, managing, and reducing fraud and associated losses. Moreover, customer treatment, including complaint handling, should be elevated to consistently deliver positive consumer outcomes in line with the Consumer Duty.

Firms are encouraged to also heed the findings from the FCA's recent publication on detecting and preventing money mules, reinforcing the need for robust systems and controls against illicit financial activities.

As part of its overarching strategy, the FCA places a high priority on fighting financial crime. Through a combination of stringent gatekeeping, assertive supervision and enforcement actions, and direct communication with consumers via the ScamSmart campaign, the FCA is determined to mitigate the risks of fraud and protect the interests of consumers in the ever-evolving digital financial landscape.