The power of APP Fraud benchmarking data

UK APP Fraud Benchmarking data and the UK reimbursement regime is beginning to shine a light on who the problem players are

The Sunday Times has today reported significant customer service issues at UK e-bank Kroo, where, according to journalist Ali Hussain, "complaints have been racking up".

One customer reports not being able to withdraw his £85,000 balance, whilst many others have had their accounts frozen or closed. Some customers have even resorted to legal action after Kroo failed to respond.

Issues like those seen at Kroo are most often linked to financial crime prevention processes, and should come as no surprise given Kroo's scam performance figures. It looks like Kroo have yanked the handbrake on financial crime controls, but at the expense of some genuine customers.

➡️ APP Fraud benchmarking data published by the UK Payment Systems Regulator in October 2024 clearly showed that Kroo was a bank favoured by APP Fraud criminals.

🛑 According to the PSR data, the rate of APP Fraud scam payments that Kroo received in 2023 was 69 TIMES greater than the worst performing high street bank Metro.

(Kroo = 2,277 APP scam payments received per million transactions received, vs Metro 122, and Santander 33 (best high street bank))

➡️ Authorised Push Payment Fraud is not possible without a receiving bank account. When a firm receives APP Fraud proceeds at a rate that is 69 times higher than the best performing bank, it's an indicator of ineffective KYC and Financial Crime controls.

➡️ This level of performance differential between Kroo and high street banks is startling. Most high street banks have reduced their APP fraud sent/received losses since the PSR began to publish data and it looks like Kroo (and other e-money institutions like it) are now the preferred money laundering route of criminals who carry out APP fraud.

➡️ The PSR's APP fraud refund rules, combined with their APP fraud benchmark is driving up standards.

top of table = worse (these firms receive proportionately more APP fraud proceeds)

bottom of the table = best (these firms receive proportionately less APP fraud proceeds)

The PSR's approach is working. Publishing APP fraud data and forcing banks to refund is having an immediate effect. Bigger banks are improving their APP fraud controls, reducing mules, and refunding more customers. As a result, APP criminals are displacing to weaker players.

Whilst such stark differentials in performance exist, the banking industry is going to find it very hard to hold social media and teclo companies liable for scam losses.

Check out my blog for other APP fraud articles: https://www.javloc.com/blog

The LINK to The Sunday Times article is here (paywall) https://www.thetimes.com/business-money/money/article/i-have-85k-stuck-with-kroo-bank-what-is-going-on-q0ftzpxwj#:~:text=TheSunday%20Times%20has%20heard%20from,back%20after%20this%20newspaper's%20intervention.

Jason Costain

Jason is the Director of Javloc.com and has worked in banking fraud prevention for 25 years, running fraud and financial crime defence teams at some of the UK’s best-known firms. 

+Follow @ https://www.linkedin.com/in/jason-costain-b529746/

Further resources at Javloc.com