Dealing with fraud is an extremely costly reality organisations need to face, and it can result in billions of pounds being lost every year. To help organisations ensure they are not losing revenue and improving their efficiency, security and trust, The Centre for Financial, Innovation and Technology (CFIT) has published its blueprint for fighting economic crime through its Digital Company ID.
CFIT‘s Digital Company ID will drive economic growth by generating significant improvements in productivity and countering the efforts of fraudsters. This is crucial given that fraud is currently costing the UK economy £6.8billion. In fact, according to ONS data, over 1.2 million incidents of fraud were committed in the UK in 2023 — equivalent to nearly two fraudulent acts every minute.
Digital Company ID will tackle this issue through a variety of different channels, both directly and indirectly. Firstly, it will mitigate fraud through unified and secure data sharing that will disrupt fraud networks and close exploitable gaps. It will then also enable financial institutions to redeploy compliance savings into strengthening anti-fraud efforts.
In addition to fraud, regulatory compliance is another major hurdle facing organisations. However, this is another area in which Digital Company ID can help. CFIT says this new approach to compliance could reduce regulatory and administrative burdens for businesses, leading to annual reduction in compliance costs of £1.7billion. This would be especially helpful for SMEs, the backbone of the UK economy.
Charlotte Crosswell, chair, CFIT
CFIT chair, Charlotte Crosswell OBE, said: “Fraud stifles economic growth by burdening businesses and banks with unnecessary costs, slowing access to setting up bank accounts and the loan finance needed for businesses to invest and grow.
“These challenges must be addressed if we’re to support the government in its mission to deliver economic growth and safeguard the UK’s reputation as a safe place to do business. Access to verified, authenticated and centralised data sharing through Digital Company ID would help dismantle these systemic barriers, close the loopholes exploited by fraudsters, reduce compliance costs for banks and transform the business landscape in the UK.”
Unlocking the full potential of Digital Company ID
The blueprint results from the work of CFIT’s industry-wide coalition that brought together a 70-strong unique group of experts in financial crime from global financial services companies, academic institutions, technology innovation hubs, government agencies, regulators and policymakers.
To unlock the full potential of Digital Company ID, the Coalition is urging the government, regulators and the wider financial sector to collaborate and put in place the necessary regulatory frameworks and initiatives. The report contains seven recommendations that will bring this work to fruition:
Develop a prototype for digital company ID: CFIT, in collaboration with industry, should launch and test a fully functional Digital Company ID prototype, preferably with the support of FCA Innovation services.
Enable reciprocal and secure data sharing: The Government should consider mandating all relevant organisations across the ecosystem to share data on economic crime, via Digital Company ID.
Appoint a lead authority: To address market coordination failures, the Government should consider appointing a responsible body to oversee implementation and governance.
Promote standards for interoperability: CFIT should work with industry to establish standards that ensure interoperability, accountability and secure adoption of Digital Company ID.
Create a multi-stakeholder taskforce: Establish a taskforce to identify, prioritise and develop high-value use cases for Digital Company ID within financial services.
Review the regulatory framework: Policymakers, working closely with industry, must review the regulatory framework for Digital Company ID ensuring it is fit for purpose.
Drive market confidence through government adoption: Government departments should lead by example, adopting Digital Company ID for critical interactions such as procurement, tax filings and confirmation statement submissions.
Responding to the blueprint
Emma Reynolds MP, economic secretary at HM Treasury, said: “The UK’s leading financial services sector is key to driving growth and putting money in people’s pockets through the Plan for Change. CFIT’s work in countering fraud demonstrates the UK’s position as an innovator within the global financial ecosystem. I look forward to considering the Coalition’s findings as part of our range of work to grow the sector.”
Elyn Corfield, CEO, business and commercial banking, Lloyds Bank, said: “The coalition has proven that digitising how banks undertake know your customer obligations will help make compliance checks more user-friendly for Britain’s small businesses and support the UK’s fight against financial crime. Delivering easier and quicker access to bank accounts and finance will also enable businesses to secure greater investment for growth and deliver more jobs for people across the UK.”
Phalé McMillan, head of financial crime risk management and deputy group MLRO, NatWest Group, said: “Financial crime is one of the most pressing crimes in the UK, which is why cross-industry collaboration is vital to protect consumers, businesses and the overall economy. The blueprint highlights the role technology plays in protecting the financial system and customers, whilst supporting UK economic growth.”
Jordan Shwide, general manager, Monzo Business, said: “Driving innovation and supporting initiatives that make life easier for SMEs is in our DNA – so we’re incredibly excited to be at the forefront of delivering a Digital Company ID solution. This will enable quicker access to financial services for legitimate businesses and ensure that key business information lives in one place. This will also make it harder for fraudsters to set up fake companies and ultimately help prevent people falling victim to fraud.”
Steve Hare, CEO, Sage, said: “The adoption of Digital Company ID has the potential to drive growth and foster greater economic prosperity. For UK SMEs, which make up 99 per cent of the business landscape, this presents an opportunity to drive productivity while reducing compliance costs and cutting through admin. Overall, an important step towards a more digitised economy.”
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