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The Deep Dive: Banking fraud trends in Germany

By Puja Sharma

April 11, 2024

  • bank frauds
  • Banking fraud
  • Cryptocurrency

banking fraudThe deep dive’ is our bi-weekly exploration of a relevant topic, hot trend, or new product. For Prime subscribers only.

How does it work?

In a report releasedBioCatch – the digital-fraud detection and financial-crime prevention powered by behavioral biometric intelligence – published findings showing Germany suffers less from the purchase scams tormenting the rest of the continent and more from typical impersonation and investment scams. Most often, these attacks come from native German-speakers residing in Eastern Europe, both making these scams appear more legitimate to German victims and contrasting with the English-speaking world, where most attacks originate in Asia. Fraud victims in Germany also received fewer refunds than those scammed elsewhere in Europe.

“If there’s good news for German banking customers,” BioCatch Director of Global Fraud Intelligence Tom Peacock said, “it’s that Germany has some of the best financial regulation in the world. We’ve seen the Federal Financial Supervisory Authority (BaFin) take the lead in identifying and then issuing regular alerts about prevalent investment scams in the country. German prosecutors have also proved effective in breaking up criminal phishing networks

Who is under the radar?

In Germany, the process for receiving refunds for scams can be challenging compared to other European countries. Legislation mandates that banks only reimburse victims of unauthorized fraud, such as phishing attacks, under specific conditions. Even then, individuals must prove they weren’t negligent, leading to delays and lower refund rates.

Additionally, the digital banking experience in Germany can be tedious due to increased risk tolerance following anti-money laundering measures. Moreover, a lack of understanding about cryptocurrencies leaves a significant portion of the population vulnerable to scams. Despite these challenges, there’s room for growth in online banking, with less than 40% of Germans utilizing advanced digital banking services like applying for new accounts online, aggregating accounts, or using digital wallets.

Why does it matter now?

While Germans may lag a bit behind other European nations in their adoption of online banking and mobile-payment systems, this is rapidly changing. BioCatch’s first-ever Germany fraud trends report shows annual growth in mobile-payment adoption rose by nearly 44% last year (more than double what it was in the UK), bringing with it equal amounts of convenience and new risk of fraud and financial crime.

BioCatch also expects the rapid advancements in generative artificial intelligence (GenAI) to impact Germany just as it will the rest of the world.

“GenAI will undoubtedly lead to more attacks against Germans that are also more sophisticated than those threats we see today,” BioCatch Regional Vice President Paul Davis said. “Already, this new technology can craft a scam in perfect German, impersonating an official’s or loved one’s voice and appearance to dupe the victim into sending the scammer money. In the future, GenAI tools will be able to identify potential victims, build a dossier of their weaknesses, and automatically devise and then refine attacks, drastically reducing the skill level necessary for human perpetrators.”

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