This blog in Finextra argues that poor KYC by banks is a major enabler of fraud. Interestingly, the blog does identify that 70% of fraud is committed by criminals using online platforms, but still holds banks accountable:
“So where is the £4m of stolen money a day going? It goes to the fraudster’s bank accounts. As explained above, fraudsters don’t like cash either! It’s true some of this money is used to finance crime and quite a lot is sitting in the small time criminal’s accounts at banks. Guess, what all money movement is electronic and tracked and audited as the money moves from bank account to bank account.
What about the banks?
Surely, one would think, the banks could do more. Yes they can!
Remember when you opened your bank account, the bureaucracy, the proving of who you are, the many questions and the time it took. Banks though do not seem to use the information you have given them, often requesting the same information again and again.
The banks know who owns the bank account and what transactions are occurring. Banks have to abide by the regulations on Know Your Customer (KYC) and Anti Money Laundering (KYC). What banks are not doing is indicating to the account holder about to make a faster payment the chances the Payee account being fraudulent.
Each bank authorises and rules it’s own accounts. We simply rent them, often at no cost, and assume the money is safe. Once Faster Payments is used by the bank account holder (the Payer) money is moved instantly with virtually no recall.
Few banks offer Confirmation of Payee and there is no bank regulations setting standards for reimbursement of frauds: ergo a double bubble for the fraudsters. Lack of coordination and cooperation between the banks and the Police is not helping. This is highlighted by 22,000 fraud cases being closed because of lack of identity – scandalous given fraudsters need a bank account to take us to the cleaners! It’s time we started talking about this and the banks step up to take responsibility.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group