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The State of Fraud and Financial Crime in North America 2023 report is an updated version of a survey conducted in 2022 among FIs in the US market. This latest research involved 200 FIs, representing a diverse spectrum from fintech/neobanks to established global banking brands across North America.
The survey, like its predecessor, relied on telephone interviews with 200 individuals responsible for fraud and financial crime in the USA (90% of respondents) and Canada (10% of respondents).
Consistency was maintained by utilizing the Federal Reserve’s FraudClassifierSM model, enabling the categorizing of twelve distinct types of fraud and financial crime. This standardized approach ensured continuity with the previous survey, providing a comprehensive view of the evolving landscape of fraudulent activities in the North America financial sector.
A closer look at some of the key findings in the report
70% of FIs report an increase in fraud rates
In the year following our first survey, the incidence of fraud and financial crime reported by North American FIs has increased across all four crucial metrics we surveyed.
The right mix of fraud technologies is needed to deliver maximum impact
In 2023, we asked financial institutions about a maximum of six measures, including rule-based algorithms, fraud scoring, AI/ML techniques, and external platforms. We found that FIs that reported lower losses from fraud had three or more measures in place, while those reporting increased fraud losses had fewer measures in place.
98% of respondents recognize a need for Generative AI as a solution for combating fraud and financial crime within their organizations. However, most of these professionals are still in the process of comprehending the technology itself or the regulatory aspects associated with it.
While exercising caution with new technologies is prudent, maintaining this stance may result in certain FIs falling behind and being outpaced by criminal activities.
Perceived cost is now the greatest barrier to innovation
For the majority of respondents, overcoming challenges in the successful prevention of fraud and financial crime involves addressing two major obstacles: the costs associated with implementing innovations and ensuring the availability of technology.
Regulatory requirements are no longer the most challenging
Regulatory requirements, which were the most challenging scenario in 2022, dropped to the sixth position in 2023. This suggests that the industry is placing greater emphasis on fraud, its associated losses, and the technical aspects of detection and prevention, rather than on money laundering and other financial crimes.
In 2023, FIs have adopted a more proactive stance in response to the evolving landscape of fraud and financial crime. FIs are now willing to embrace and launch innovative solutions (from 10% in 2022 to 24% in 2023).
FIs that have encountered higher losses appear more inclined to take risks by positioning themselves as market leaders to confront their growing challenges.
Nonetheless, a sense of caution persists.
FIs that have embraced flexibility, adaptability, and continuity have been able to mitigate fraud losses compared to those FIs that have delayed their decision to act.
The overall response from Canada suggests a greater level of caution; in fact, while a quarter of US FIs would be first-to-market with innovative solutions, just 5% of Canadian FI’s gave this response.