3 months ago • 5 mins
The figure is sobering.
According to findings recently published by trade body UK Finance, more than £600 million was lost to fraud during the first six months of 2022. Its conclusion is as sobering: “The UK faces an epidemic of fraud”.
Financial crime rose rapidly during the pandemic. Now, the cost of living crisis is providing a fresh hook for scammers with the current economic stresses triggering a new wave of financial crime.
As just one example, fraudsters have taken advantage of the rising costs of energy to scam consumers. The number of frauds naming one of the big energy companies was up 10% in the first quarter of 2022, compared with the same period last year, findings from Which? and Action Fraud revealed.
Platform providers like abrdn are seeing an increased risk to consumers of financial harm, particularly in the following three areas:
The impact of being a victim of financial crime, especially on vulnerable customers, can mean not only the potential loss of life savings, but long-term emotional trauma too.
Protecting clients is at the heart of advice. More than any other type of financial services firm, advisors are in the best position to provide consumers with protection from financial harm.
It’s also good practice to have layers of protection to prevent consumers becoming victims of fraud. When a consumer uses an advisor, the scammer has to get through both the advisor firm’s controls and the controls of the provider. It means the advised have the potential to benefit more from protection against harm than the non-advised.
This protection will be further strengthened with the FCA’s Consumer Duty rules. The regulation will require advisors to support their clients by preventing "foreseeable harm" through recognizing a change in the economic climate and economic behaviors that may lead to an increased risk of financial crime.
The Consumer Duty’s Consumer Support outcome will require firms to protect clients from acting in a way that’s detrimental to their best interests. It includes a requirement to provide clients, especially those approaching retirement, with more awareness of scams. This is one of the most valuable parts of a firm’s service to its clients and as such, should be articulated to clients as a key part of the proposition.
It’s also where advisors can demonstrate to the regulator that they’re complying with the spirit of the Consumer Duty by communicating the increased risk of scams to clients and by recalibrating their firm’s financial crime controls.
There are simple steps your firm can take such as putting an anti-fraud checklist into the advice process which will not only help to protect your clients, but will help to protect your business too. Here are some practical steps to take:
Despite all the government’s distractions this year, there’s still a commitment to tackle the financial crime epidemic in the UK.
Its Economic Crime and Corporate Transparency Bill will increase the powers of the Serious Fraud Office while the proposals in the Online Safety Bill, also going through Parliament, would introduce advertising guidelines for platforms such as Facebook to help prevent scammers targeting consumers this way.
The value of investments can go down as well as up and your clients could get back less than they paid in.
The views expressed in this article should not be regarded as financial advice.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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