Background screening in the UK finance sector: What is a CIFAS check?

‍The finance industry is a dynamic, forward-thinking industry - evolving and growing with a significant demand for highly skilled and specialist workers. Widely regarded as an attractive industry to work in, it’s a sector that offers higher-than-average wages, a great host of benefits as well as great career progression opportunities.

But it’s also an industry with huge vulnerabilities. As financial organizations are entrusted not only with individuals' financial matters but also with the critical responsibility of safeguarding customers' highly sensitive personal and financial data, it is a primary target for data theft and financial fraud. So what is this sector doing to protect itself, and how can UK finance companies mitigate these types of risks?  

The financial services industry plays a substantial role in the global economy, accounting for at least 20% of its total value. In the UK alone, the financial sector contributed £173.6 billion to the economy in 2021, making up 8.3% of the country's economic output and establishing the UK as the largest financial sector outside of the US.

Despite its remarkable growth, the financial industry faces significant challenges, especially concerning insider fraud and other financial crimes. While financial institutions adhere to stringent regulations and processes, insider fraud is on the rise. NatWest reported a total of £190 million in fraud losses in the first year of the pandemic, with 40% of the losses attributed to internal staff.

Recent data from the CIFAS Fraudscape report revealed that 270 individuals were reported to UK authorities in 2021, and 41% of these cases involved cash theft from employers. In the US, a Carnegie Mellon University study focused on banking and insider fraud and found that 26% of all bank fraud in 2021 was perpetrated by insiders.

These findings underscore the importance of continuous efforts to combat financial crimes and enhance security measures within the financial services sector. Proactive measures and robust safeguards are necessary to mitigate the risks posed by insider fraud and protect the integrity of the financial industry.

Historically, the UK finance sector has faced challenges related to fraud, including identity theft, payment card fraud, cybercrime, and investment scams. The financial industry is a lucrative target for fraudsters due to the high volume of transactions, the vast amount of personal and financial data it handles, and the potential for significant financial gains.

While financial institutions and regulatory bodies continuously work to enhance security measures and combat fraud, it remains a persistent threat. The impact of fraud can be substantial, leading to financial losses for both individuals and businesses, reputational damage for financial institutions, and a strain on consumer confidence.

Efforts to combat fraud in the UK finance sector include advanced fraud detection systems, increased cybersecurity measures, education and awareness campaigns for consumers, and collaboration between financial institutions and law enforcement agencies.

It's essential for individuals and businesses to remain vigilant against fraud by adopting strong security practices, safeguarding personal information, and promptly reporting any suspicious activities to the appropriate authorities. Additionally, staying informed about the latest fraud trends and preventive measures can help mitigate the risks associated with fraud in the finance sector.

The vulnerabilities of the finance industry

The finance industry is considered vulnerable to various forms of financial crime and fraud due to several factors:

1. ‍High-value transactions: The finance industry deals with large sums of money daily, making it an attractive target for criminals seeking to commit fraud or money laundering.‍
2. Sensitive financial data: Financial institutions collect and store vast amounts of sensitive customer data, including personal and financial information. The loss or compromise of this data can lead to identity theft and other fraudulent activities.
3. ‍Rapidly evolving technology: The adoption of digital technology and online financial services has provided new opportunities for cybercriminals to exploit vulnerabilities and conduct sophisticated attacks.
4. ‍Global nature of finance: Financial transactions often involve cross-border operations, which can create challenges in tracking and prosecuting international financial crime.
5. ‍Complex regulatory environment: The finance industry operates under a complex web of regulations and compliance requirements. Adherence to these regulations can be challenging, and any lapses may expose institutions to vulnerabilities.
6. Insider threats: Employees within financial institutions can pose security risks if they misuse their access to sensitive information or engage in fraudulent activities.
7. ‍Cybersecurity risks: The finance sector faces constant threats from cyberattacks, including phishing, ransomware, and data breaches, which can lead to financial losses and reputational damage.

Due to these vulnerabilities, financial institutions invest heavily in fraud prevention, risk management, and cybersecurity measures to protect their assets and customers. Collaboration with law enforcement, industry associations, and regulatory authorities is essential to address the dynamic nature of financial crime and stay ahead of emerging threats.

What is CIFAS?

CIFAS (Credit Industry Fraud Avoidance System) is a not-for-profit fraud prevention organization based in the UK. It is a leading provider of fraud prevention and detection services, offering various tools and solutions to help businesses combat fraud and financial crime. CIFAS operates as a collaborative platform where member organizations from various sectors, including finance, telecommunications, retail, and government, share fraud data to identify and prevent fraudulent activities. The organization plays a crucial role in safeguarding businesses and individuals from financial fraud by promoting information-sharing and best practices in fraud prevention.

A CIFAS check, also known as a CIFAS Fraud Prevention Database check or a CIFAS Protective Registration, is a type of background screening that aims to prevent financial fraud and protect individuals and businesses from becoming victims of identity theft or fraudulent activities.

When someone becomes a victim of identity theft or suspects that their personal information may be at risk, they can apply for CIFAS Protective Registration. This process involves registering their details with CIFAS, which places a warning flag on their personal information. It alerts financial institutions and organizations to be extra cautious when processing any applications or transactions associated with that individual's details.

A CIFAS check is not a routine pre-employment screening process but is specifically related to combating identity fraud and financial crime. It is typically used when there are concerns about the potential risk of identity theft or fraudulent activity, providing an additional layer of protection to the individual's financial accounts and personal information.

The CIFAS check from Veremark

Veremark’s CIFAS Check searches the CIFAS databases to confirm that an individual does not have a history of committing fraud.

Depending on employers’ CIFAS membership, Veremark will search either the Internal Fraud Database (IFD) or the Enhanced Internal Fraud Database (EIFD) which also searches the National Fraud Database (NFD). This search defends employers against risks and ensures they are hiring dependable individuals.

These comprehensive fraud prevention databases defend employers against risks such as financial and reputational damages and ensure they are hiring dependable individuals to move their organisation forward.

What the product does

• Searches the CIFAS databases: either the IFD or EIFD based on employers’ CIFAS membership
• Identifies if an individual has any fraudulent activity matches in the CIFAS databases
• Collects individuals' consent, agreement to CIFAS Fair Processing Notice, and information required to run the check via Veremark’s platform

What the product does not do

• Perform searches on employers who are not CIFAS members
• Share the CIFAS case details on Veremark’s platform, this info must be viewed in employers’ CIFAS Portal

Veremark’s CIFAS Check returns the proof of completion PDF that includes CIFAS Case IDs. Employers can use this info to view the case details in their CIFAS Portal. Veremark will indicate if a match has been found.

Other background checks for the UK finance sector

Among the selection of other relevant background checks that Veremark offers is the Fit and Proper Test, which has been designed to comply with the requirements of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). This comprehensive questionnaire serves as an essential tool to assess an individual's fitness and propriety.

The test evaluates various aspects, including honesty, integrity, reputation, competence, capability, and financial soundness. Senior Managers and Certification Regime (SMCR) firms are obligated to administer this test to ensure that staff members are suitable and trustworthy to perform controlled functions or high-responsibility roles.

Furthermore, the firm is responsible for continually assessing the fitness and propriety of relevant staff, which may include regular re-assessments such as annual or role-specific evaluations. Veremark's Fit and Proper Test offers a reliable and compliant solution for evaluating the capabilities and trustworthiness of individuals in regulated roles.