May 22, 2018 / 11:05 AM / 7 months ago

UK watchdog tells banks to fight cybercrime with innovative technology

LONDON (Reuters) - Banks and other financial firms have rejected over a million new customers and cut off 370,000 existing ones due to financial crime concerns, Britain’s Financial Conduct Authority said on Tuesday.

FILE PHOTO: An illustration picture shows a projection of binary code on a man holding a laptop computer, in an office in Warsaw June 24, 2013. REUTERS/Kacper Pempel/Illustration/File Photo

The watchdog published findings from its first annual financial crime review based on surveys of 2,100 regulated firms until December 2017, showing the scale of cybercrime in Britain’s biggest economic sector.

Banks should arm themselves with better technology to tackle crime such as phishing and identity theft, now the most widespread fraud risks being faced, said Megan Butler, the FCA’s executive director of supervision for investment, wholesale and specialist firms.

Phishing refers to fraudulent emails from someone posing as a bank or other firm asking for individuals to reveal their passwords or credit card details.

Cybercrime in general now accounts for nearly half of all recorded crime in Britain, Butler noted.

Firms sent 2,117 terrorism-related reports to the National Crime Agency, with 13,000 restraint orders to freeze customer accounts.

Over 1.1 million prospective customers were refused services due to financial crime concerns, with a further 370,000 existing customer relationships “exited” for the same reasons, Butler said.

Banks have faced criticisms for cutting off individuals and companies from banking services without giving clear reasons, raising concerns among lawmakers.

British banks alone spend some five billion pounds a year combating financial crime, a billion more than the country spends on prisons, Butler told a conference on steps to counter money-laundering.

Butler said that innovating with technology is increasingly essential for combating financial crime, but warned that “cheap technologies that aren’t tested and don’t work properly are not acceptable alternatives to old, expensive tech systems that do”.

Many banks are still employing thousands of investigators to manually review high-risk transactions and accounts, but Butler acknowledged there is reluctance around innovating, especially when it is judged to add regulatory risk.

She urged firms to tell the watchdog about methods, innovations or technologies that help them combat crime - and not be afraid to be the first to use them.

“Excessive risk aversion is not going to help us win an arms race that is so heavily rooted in automation,” Butler said.

Reporting by Huw Jones; Editing by Keith Weir

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