How it can be an effective tool against one of the sector's biggest issues
Fraud and money laundering are big business, especially in the UK. A report by the trade association for the banking and financial services sector, UK Finance, recently found that criminal gangs stole more than £1.3 billion through fraud last year.
And in a separate investigation by The Daily Mail, it found that fraud losses per person were higher in the UK than in any other leading western country, ahead of the United States, Canada and Australia, adding that more than 40 million adults in the country - nearly three in every four - had already been targeted this year by fraudsters, who stole £700 million from UK consumers in April alone, resulting in almost £3 billion in overall losses.
But fraudsters find it profitable to target companies as well.
According to research by PricewaterhouseCoopers (PwC), 46% of surveyed organisations have experienced fraud, corruption or other economic crimes in the last two years, even if the proportion of organisations experiencing fraud has remained relatively steady since 2018.
The report revealed that organised crime groups “are becoming more specialised and professional” and even have “goals, incentives and bonus structures” in place.
Attacks are also becoming increasingly high-tech. Everywhere from chat rooms, the dark web, crypto currency to false ID creation are avenues and tools for criminals to exploit.
Against this unnerving backdrop not a million miles from what you might have seen on the BBC’s disturbing high-tech crime thriller, The Capture, there are some firms fighting back with increasingly sophisticated technology.
Read more: Half of regulated firms still rely on manual verification
One of these is Irish-based fintech start-up, ID-Pal, which claims to possess one of the most effective weapons against cyber criminals.
Its digital facial ID verification system - the company’s core offering – simply allows a business to verify the identity of a customer through facial recognition.
ID-Pal says its ability to verify documents in seconds, “beat every single type of attack” for liveness testing – including deep fakes – and for managing data security, can help mortgage firms combat cybercrime and protect themselves from fraud.
CEO Colum Lyons (pictured) told Mortgage Introducer that staying one step ahead of cyber criminals was key, particularly when fraud is carried out on a global scale.
“I always say about fraudsters that it’s their full-time job,” he said. “We very much classify ourselves as an orchestration layer, so underneath that are a lot of other technology providers. That allows us to move with the times - we are unbelievably flexible and very agile in terms of how we change and plug in and plug out different technologies.
“One of the key advantages of using technology is that the system is constantly learning, it’s constantly updating, and it can give a business that kind of assurance that the person is who they say they are when you add in facial recognition.”
The system carries out a ‘liveness test’ where the individual looks into a camera on their mobile device for a couple of seconds. In that time ID-Pal checks the depth of the person’s face, the movement of their eyes to prove that they’re a real person and not a photo or a video of a video.
The subsequent verified image is then sent to the relevant business.
The importance of determining a person’s identity became almost an obsession for Lyons while working as a stockbroker, prior to founding his company in 2016.
“My first touch point was onboarding my customer, and there were a lot of people that would drop off because of the bad experience that they were having around proving their identity. It wasn’t a good use of my time or resources by the company from a marketing spend,” he said.
Read more: Exactly who are you doing business with?
Lyons believes the mortgage industry is just as vulnerable to fraud as any other, with the added concern that often far larger sums of money are involved.
“There’s a big difference between losing £800 on your credit card compared to £350,000 on your mortgage. When you’re dealing with high value goods, you shouldn’t just be using a database on its own, you should be associating the risk to the products and the technology that you’re trying to use,” he stressed.
“Obviously the high volume within the mortgage space is definitely one of the things that’s attractive to a criminal. For fraudsters dealing with smaller values, they need to get a lot of hits and a lot of clicks, but all they need to do is get one or two deals within the mortgage space each year to make it worth their while.”
Despite the bad rap the UK gets, Lyons said Britain has “really strong databases” to allow businesses to verify the identities of individuals.
Unfortunately, a lot of those have been hacked, which has created an added problem for those solution providers that are just providing data sources, hence the importance of facial ID, he added.
“We always bring it back to who that individual is - it’s not just data.”
According to the National SIRA database, almost 3,000 cases of mortgage fraud were recorded in 2016 alone, noting that mortgage fraud “remains a high-ticket crime”. It added that nine in 10 fraudulent applications for all financial products were made online and that, increasingly, this was down to identity fraud.
In response, there are currently about 250 financial services firms using ID-Pal, showing that a large number of companies take the threat of identity fraud seriously.
And while financial services watchdogs have, on occasion, accused the UK government of not doing enough to tackle fraud, Lyons said consistency of legislation as well as increasing education was crucial if fraudsters were to be stopped in their tracks.
“It’s not just about the business and the business implementing solutions, but about actually making individuals and people more aware,” he said. “We’re all at risk, so I think there’s a responsibility for all of us as well.”
