Briefing Paper: JFSC Bitesize Feedback on Fraud Controls and Response in Banking July 24, 2025

The Jersey Financial Services Commission’s (JFSC) 2024 and Q1 2025 thematic assessments, findings have been summarised in a:-

• "Bitesize Feedback: Banking Fraud Controls and Response."

Executive Summary

• Background In 2024 and Q1 2025, the JFSC conducted thematic assessments to evaluate the extent to which supervised banking institutions adhered to legislative and regulatory requirements for fraud controls and response.
• The assessments focused on the effectiveness of governance, systems, and procedures in preventing and responding to fraud, as well as ensuring fair treatment of customers.
• The document, "Bitesize Feedback: Banking Fraud Controls and Response," summarizes these findings, structured into good practices observed, areas requiring improvement, and key considerations for enhancing anti-fraud measures.
• The findings aim to address the rise in fraudulent activity and promote compliance with regulatory standards.

Analysis of Findings

Good Practices Observed

The assessments identified several effective practices in fraud controls and response:

• Increased Investment in Fraud Controls: Institutions demonstrated a resolve to address weaknesses by investing in systems and staff training, prioritizing customer interests;
• Operational Improvements: Combining fraud investigation with complaint handling increased available resources and supported timely and fair treatment of customers; and
• Enhanced Cooperation: Institutions improved engagement, cooperation, and transparency with the JFSC, Government of Jersey, States of Jersey Police, and other island agencies to pursue lasting solutions to rising fraudulent activity.

Areas for Improvement

The assessments highlighted deficiencies that require attention:

• Inadequate Suspicious Activity Reporting: Procedures for reporting suspicious activities related to fraud were inadequate or ineffective, impeding early detection and prevention;
• Weak Systems and Controls: Failures in systems, controls, and adherence to procedures increased the risk of facilitating fraud on customer accounts; and
• Inadequate Response Actions: Institutions failed to ensure instructions received were lawful, did not adequately respond to customer alerts or potential fraud, and neglected to address case reviews and customer complaints effectively.

Key Considerations

The document poses critical questions to guide institutions in improving fraud controls:

• Governance and Oversight: Do business risk assessments periodically review and document the effectiveness of the fraud risk control framework to ensure it remains fit for purpose and delivers consistently fair customer outcomes?
• Benchmarking Standards: Have institutions benchmarked their anti-fraud approach against their parent group’s standards and best practices promoted by home regulators, such as the UK’s Financial Conduct Authority, to identify and mitigate fraud risks?
• Reimbursement and Compensation: Is the decision-making approach to reimbursement and compensation for fraud victims comprehensively documented to ensure consistent and fair customer treatment?

Recommendations

Based on the document’s findings, banking institutions should implement the following measures:

1. Strengthen Suspicious Activity Reporting: Develop robust procedures for timely and effective suspicious activity reporting (SAR) related to fraud, ensuring early detection and prevention.
2. Enhance Systems and Controls: Review and strengthen systems and controls to prevent fraud on customer accounts, ensuring strict adherence to procedures.
3. Improve Response Mechanisms: Establish processes to verify the lawfulness of instructions, promptly respond to customer alerts and potential fraud, and efficiently handle case reviews and customer complaints.
4. Enhance Governance Oversight: Periodically review and document the effectiveness of the fraud risk control framework in business risk assessments, ensuring it delivers fair customer outcomes.
5. Benchmark Against Best Practices: Compare anti-fraud measures with parent group standards and best practices from regulators like the UK’s Financial Conduct Authority to identify and address fraud risks.
6. Document Reimbursement Decisions: Comprehensively document the decision-making approach to reimbursement and compensation to ensure consistent and fair treatment of fraud victims.

Conclusion

• The "Bitesize Feedback: Banking Fraud Controls and Response" document provides critical insights into the effectiveness of fraud controls and response mechanisms in the banking sector, based on JFSC assessments in 2024 and Q1 2025.
• While institutions have made progress in investing in systems, training, and inter-agency cooperation, deficiencies in suspicious activity reporting, systems and controls, and response actions require urgent attention.
• By addressing these gaps and reflecting on the key considerations, banks can strengthen their anti-fraud frameworks, enhance customer protection, and ensure compliance with JFSC regulatory standards.

Read the bitesize feedback here:

https://www.jerseyfsc.org/media/1greh5iz/bitesize-feedback-banking-fraud-controls-and-response.pdf

https://www.jerseyfsc.org/news-and-events/bitesize-feedback-for-the-banking-sector-on-fraud-controls-and-response/