“We don’t have any internal fraud…” Internal Fraud and its Risks to FinTechs

• In Event: Technology, Surveillance, and Perceived Security

Abstract

This research explores the vulnerabilities of Financial Technology organisations to internal fraud and identifying effective controls. Otherwise known as employee fraud, occupational fraud or insider fraud, internal fraud is where a prospective, current or outgoing employee defrauds (or attempts to defraud) their current, prospective or past employer, respectively. Here, ‘employee’ is defined as anyone employed by the company in question; they be a solo bad actor or working in collusion with others - who may be internal or external to the business. It is unpalatable to think of a colleague perpetrating fraud against the company paying our salary, thus it is often denied by organisations. We are used to envisaging individuals as victims, not companies.

Since the economic crash of 2008, Financial Technology organisations have overtaken legacy banks as the financial institution type of choice for many. Prioritising digitalisation, agility and latest technologies, these organisations commit to providing the best products, services and experience for customers. Further exacerbated by recent socio-economic changes such as the Coronavirus pandemic and cost-of-living crisis, insider fraud has risen substantially, according to some studies.

Existing research has focussed on large global banks and the psychological makeup of its perpetrators. This research explores new ground, focussing on UK-headquartered Financial Technology organisations and interviewing their consultants and employees. The acquisition of empirical data provides first hand insights into how this industry can better detect, deter, prevent and respond to insider fraud through operational, risk and strategic evidence.

Author

• Claire Maillet, University of Portsmouth