Financial Crime World

Fraudulent Transactions on the Rise in Swiss Banking

Introduction

Switzerland is set to introduce instant payment systems, allowing consumers and businesses to make transactions worth up to CHF20,000 directly from their online or mobile banking apps. While this development promises to revolutionize retail and corporate bill payments, it also raises concerns about the potential for fraudulent activity.

Concerns over Fraudulent Activity

Experts warn that the lack of time to recall or stop a payment if an error or fraud is made makes instant payments more susceptible to scams. Analysis has shown that fraudsters can move money through multiple accounts within just a few minutes of the original fraud taking place. This means that financial institutions must be proactive in detecting and preventing fraudulent activity.

Rise of Online Banking Fraud

The rise of digital transactions has led to an increase in online banking fraud, with the UK seeing a 132% increase in the first years after the introduction of real-time payments. Similarly, Switzerland can expect a surge in fraudulent activity as instant payments become more widespread.

Mitigating Threats

To mitigate these threats, financial institutions must:

  • Provide multi-factor authentication options
  • Implement real-time transaction monitoring
  • Use transaction enrichment with external device intelligence and watchlists of known mule accounts and crypto wallets
  • Build a fraud hub to monitor transactions in real-time
  • Utilize machine learning and AI to target unauthorized and authorized fraud
  • Ensure that their fraud operations can support the 24/7 nature of real-time payments

Improving Application Fraud and KYC Processes

The Swiss banking sector must also improve its application fraud and KYC processes at onboarding by:

  • Adding mule watchlists
  • Integrating with the fraud hub to target mules throughout the lifecycle
  • Reducing the risk of fraudulent activity

Conclusion

While instant payments offer many benefits to consumers and businesses, they also present significant risks to financial institutions. To protect against these threats, Swiss banks must invest in robust fraud systems and people to prevent the misuse of this technology.

By taking proactive steps to detect and prevent fraudulent activity, financial institutions can ensure a safe and secure payment system for their customers.