Germany’s Banking Industry Struggles with Financial Crime Prevention

Scam Refunds Elusive for Victims as Germany Lags Behind EU Peers

Germany’s banking sector is facing a growing threat from financial crime, with a recent report by BioCatch revealing that the country lags behind its European peers in providing scam refunds to victims. According to the study, Germans are less likely to receive reimbursement for unauthorized transactions compared to other EU nations.

Prevalence of Impersonation and Investment Scams

The report highlights the prevalence of impersonation and investment scams in Germany, which often originate from native German-speakers residing in Eastern Europe. These attacks can be particularly effective due to their legitimacy in the eyes of German victims, who may be more susceptible to convincing fraudulent schemes.

Room for Improvement in Preventing Financial Crime

BioCatch’s Director of Global Fraud Intelligence, Tom Peacock, noted that while Germany has some of the best financial regulation in the world, there is still room for improvement in preventing and combating financial crime. He praised the Federal Financial Supervisory Authority (BaFin) for its efforts in identifying and issuing alerts about prevalent investment scams, as well as German prosecutors for their success in dismantling criminal phishing networks.

Rapid Growth of Mobile Payment Adoption

The report also highlights the rapid growth of mobile payment adoption in Germany, which has increased by nearly 44% over the past year. While this convenience brings with it new risks of fraud and financial crime, BioCatch’s findings suggest that German banks are not doing enough to protect their customers from these threats.

Low Rate of Scam Refunds

Legislation in Germany requires banks to only reimburse victims of unauthorized transactions if they can prove they were not negligent. This has led to a low rate of scam refunds compared to other European countries, where legislation is more customer-friendly.

Anti-Money-Laundering Failings Add Friction for Customers

The recent anti-money-laundering (AML) failings in Germany have also led to a reduction in risk-tolerance among financial institutions, resulting in added friction and headaches for customers using digital banking services.