Combating the Growing Threat of Pension Fraud

Combating the Growing Threat of Pension Fraud:
Practical Steps for Administrators and Trustees

Explore practical strategies to combat pension fraud. Enhance security, ensure data quality, and protect retirement savings.

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What is the Threat facing Pensions?

Pension fraud is emerging as a significant concern as it poses a threat to individuals' retirement savings and has the potential to undermine trust in pension schemes. As pension scheme administrators and trustees, it is crucial to understand this growing menace and proactively take steps to combat it.

But what does this really mean and what practical steps can administrators and trustees take today to get ahead of the threat of pension fraud and safeguard the interests of scheme members?

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Understanding Pension Fraud

Pension fraud encompasses various fraudulent activities, including investment scams, identity theft, and unauthorised access to pension funds. Fraudsters employ sophisticated tactics to exploit vulnerabilities within pension schemes, resulting in devastating financial consequences for individuals.

Our Digital Pensions Fraud Report evaluates the pensions sector's current identity verification standards to stop sophisticated fraud attacks, in the run up to digitalisation.

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Taking Action: What practical steps can pension providers take today to help combat pensions fraud?

1. Recognise the Risk

Fraud can happen at any point within the member journey. Forms of fraud are varied, so it’s important to keep abreast of emerging fraud trends and be able to recognise the hallmarks of a scam. The migration to digital platforms will increase the risk of more fraudsters entering the ecosystem. Without the right fraud checks in place, the industry will be in the dark about just how many fraudsters are operating on their portfolios.

2. Continuously Review Data Quality

Incorrect or incomplete data can stop providers from getting in touch with members at the point of need and allows fraudsters to manipulate identity details more easily. Data quality audits and ongoing monitoring of member data can identify out-of-date data, so providers can take steps to rectify them.

3. Strengthen Security Measures

Enhance the security protocols surrounding pension schemes. Verify the identity of auto-enrolled members the first time they login or at least carry out identity assurance measures rather than waiting until a transfer of funds is requested. If identity verification is not carried out upfront, there is a risk of criminal intelligence gathering that could lead to a breach. It’s also important to implement multi-factor authentication as members subsequently log in to view or manage their funds, to prevent unauthorised access.

4. Spot High Risk Signals

Leverage fraud signals across devices, digital identities and past behaviours to spot high risk signals, for example using email, phone intelligence or behavioural biometrics, to authenticate genuine members in real time.

5. Encourage Reporting

Establish clear channels for members and employees to report suspicious activities or concerns. Ensure confidentiality and create a supportive environment that encourages reporting without fear of repercussions.

1. Recognise the Risk

Fraud can happen at any point within the member journey. Forms of fraud are varied so it’s important to keep abreast of emerging fraud trends and be able to recognise the hallmarks of a scam. The migration to digital platforms will increase the risk of more fraudsters entering the ecosystem. Without the right fraud checks in place, the industry will be in the dark about just how many fraudsters are operating on their portfolios.

2. Continuously Review Data Quality

3. Strengthen Security Measures

4. Spot High Risk Signals

Leverage fraud signals across devices, digital identities, and past behaviours to spot high risk signals, for example using email, phone intelligence or behavioural biometrics to authenticate genuine members in real time.

5. Encourage Reporting

How We Can Help

The growing threat of pension fraud necessitates proactive measures from pension scheme administrators and trustees. By raising awareness, ensuring high data quality, implementing more robust security measures and being able to recognise high risk signals, administrators and trustees can enhance the resilience of pension schemes and protect the retirement savings of their members.

Data and analytics providers, like LexisNexis® Risk Solutions, are well-equipped to help mitigate against fraud by supporting pension providers in:

Reducing risk exposure and delivering good customer experiences by maintaining accurate, complete and current member information

Validating members' details through robust member identity verification and authentication using market-leading data coverage of the UK population

Catching fraud upfront using predictive analytics powered by extensive data resources, advanced statistical linking and supercomputing technology

Recognising high risk fraud signals, using modelling and machine learning techniques and drawing on a digital identity network comprising crowd-sourced device and behavioural intelligence taken from almost 100 billion transactions each year

Taking advantage of the learnings of other fraud-sensitive sectors that are further ahead with digital transformation, to establish and implement security protocols

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