Advisers can play a role in helping clients avoid becoming a victim of financial crime by educating them on the signs.
Martin Rehak, founder and CEO of financial crime fighting startup, Resistant AI, said alongside banks strengthening their systems, advisers can warn their clients to spot the signs.
Resistant AI was launched in 2019 and Rehak said financial crime gangs have become smarter and he fears document automation puts the financial industry at risk of an increase in fraud.
He argued that automating the handling of documents also automates the fraud that can be associated with them.
This can increase the risk of fraudsters repeatedly testing a system to find vulnerabilities and being successful.
Financial institutions use processing systems which can read and transcribe documents but can’t yet tell whether they are legitimate.
While Rehak’s company is working with financial services firms, particularly start-ups, he thinks education about the risks of financial fraud can start when people come to their adviser.
The volume of what you can actually investigate on your own is quite low and which police department on the planet is set up to deal with crimes that you count per second?.Speaking to FT Adviser, he said: “On one level, obviously you have to protect your customers from becoming victims.
“Advisers can build trust and make sure that they understand the risks – make sure that you educate them.”
Advice he gives his own parents is to never take a phone call from a bank as there is no way to verify it is actually your bank.
“The fraudsters are very professional and they know how to talk the victim into trusting you as a bank,” he added.
Rehak went on to say that as banks get smarter and use more technology to automate their systems, so do criminals.
Resistant AI’s machine learning techniques look for anomalies in documents, transactions, and behaviours to detect threats.
“As a team of founders we have been working together since 2005 - we come from AI, computer science and network security background," said Rehak.
“We decided that our next endeavour of Resistant AI was going to be financial crime, and catching crime to be precise.”
He said gangs are now set up to carry out so many cases of financial fraud it can be measured per second, whereas banks are only set up to deal with, for example, 500 frauds per month.
“The volume of what you can actually investigate on your own is quite low and which police department on the planet is set up to deal with crimes that you count per second?," Rehak added.
“So defences and prevention are very important, you always need to make systems tighter.”
The CEO added that the fastest growing form of financial crimes is authorised push payment (APP) fraud, when someone is tricked into sending money to a fraudster posing as a genuine payee.
In 2022/23, the Financial Ombudsman Service received 21,918 fraud and scam complaints, up 18 per cent on the year before.
Of these, 10,985 were about APP scams, a third of which related to investment scams.
And data from UK finance, released last month, found that in the first half of 2023, fraudsters stole more than £580mn from UK consumers.
The trade association said more than 116,000 cases of APP, or authorised push payment fraud, were recorded - an increase of 22 per cent.
tara.o'connor@ft.com
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