Financial crimes predictions for 2023

• Feb 6, 2023

For many, fraud and money laundering has hit overdrive ? check fraud, card fraud, postal carriers being robbed at gun point, and daily scams. The downturn in the economy this year appears to be fueling new fraud risks. Americans reported to the Federal Trade Commission (FTC) a record $3.56 billion lost to online fraud in the first six months of 2022. That is nearly a 50% increase from the same period a year ago and is only expected to increase in 2023 as scam tactics evolve and the uncertain economic situation continues. What does this mean for the financial industry as we head into a new year? Below outlines what financial institutions should keep an eye on along with strategies to prepare and fight financial crimes. Scams aren?t going anywhere; but the rules are changing. Scams are still the number one type of crime in the United States. Some methods that took front stage this year include work-from-home, charity, check, and fake job posting scams; in fact, in the first quarter of 2022, Americans were scammed out of $68 million as a result of fake business and job opportunity scams. Text fraud also grew, costing consumers $137 million in the first half of 2022. Scams continue to become increasingly sophisticated and harder to detect; and to make matters worse, fraudsters are going after the path of least resistance, the accountholders. Financial institutions face a long road ahead if they do not act fast, especially as the Consumer Finance Protection Bureau?s (CFPB) new interpretation of Reg E now states that if a customer is scammed into giving out credentials or pin numbers, and does not directly benefit from the stolen money, they are covered under Reg E. This places even more stress on community and regional financial institutions who can?t cover large amounts of loss. A modern technology provider with flexible technology capabilities can help these institutions stay ahead of current and emerging threats and effectively build a financial crimes strategy unique to their needs. This will help increase security and business resilience, while allowing bankers to boost efficiencies and focus on building and nurturing client relationships. Identity fraud will continue to drastically increase. Unemployment and financial aid programs took a major hit from identity theft schemes in 2022. Student loan scams amounted to an estimated $5 billion this year, achieved through ?too-good-too-be-true? offers and impersonation strategies. Fraudulent unemployment insurance claims meant for people laid off during Covid-19 amounted to an estimated $45.6 billion. Now we will see numbers begin to spike in student loan forgiveness fraud as well. If you Google search ?Student Loan Forgiveness Program? you will find multiple sites that are either fraudulent or a fake company trying to get business by offering student loan relief.  Fraudsters keep up with the news and follow trends like the rest of us; only they act on our vulnerabilities. The industry will need to look back at what happened during Covid-19, with fraud going rampant over government programs, learn from the mistakes, and build effective strategies designed to keep their business and accountholders safe. Coordinated crime will increase the need for a flexible technology architecture. Fraudsters and cybercriminals have found working together in a coordinated way is a better method of exploiting financial institutions. If a financial institution becomes preoccupied with one vector that is attacked, for example a ransomware, it becomes more exposed to other fraudulent practices, such as phishing. Financial institutions need to be proactive, detecting fraud before it happens and in real time. They need advanced and flexible, forward-looking technology that can help them adapt to and effectively manage today?s constant threats, while also building an atmosphere of trust and serving accountholders in their moment of need. However, this environment is very hard to achieve if they are constantly having to put out fires. Although the numbers can look scary, it?s not all negative. The industry as a whole is developing and reinventing itself. Yes, fraud is not going anywhere. But with the right technology and education in place, community and regional financial institutions will be able to better predict and stop fraud before it happens so they can continue to innovate, grow, and securely meet their accountholder expectations with ease as we head into 2023 and beyond. About Author: Rene Perez is a director of financial crimes solutions sales and financial crimes consultant at Jack Henry, leading the company?s financial crimes portfolio for the past 15 years. He also contributes to the Federal Reserve Bank Payments Improvement Fraud work group. Jack Henry (NASDAQ: JKHY) is a leading SaaS provider primarily for the financial services industry. Read more about their risk management contributions here. 

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