Digital IDs are the UK's best defence against financial fraud – here's why they protect national security

16 June 2025, 06:59 | Updated: 16 June 2025, 14:00

Financial fraud makes up over 40% of all reported crime in England and Wales. This impacts every single one of us, not just those who are cheated out of their life savings or lose their businesses.

Each year, £6.8 billion is lost to the black market – money that could otherwise be spent legitimately with businesses in every corner of the UK, helping to grow our economy to the benefit of us all.

Fraud is a global issue, but its growing threat is also affecting the UK's competitiveness and ability to attract capital from abroad.

Breaches of our financial system are not just opportunistic. Some are simple, enabled by rapidly evolving AI technology that can work quickly and at scale, while others are sophisticated and coordinated.

Many are linked to organised crime and bad actors, posing a growing threat to our financial system and the UK’s national security.

Fraudsters - like any criminal - exploit weaknesses, and our digital infrastructure has plenty: outdated legacy systems, inconsistent reporting practices and a lack of real-time, integrated data sharing.

The various systems we rely on, especially across borders, often don't work well together (a problem known as poor 'interoperability'). This creates blind spots.

So, despite spending £34.2bn on compliance every year, financial institutions still struggle to detect suspicious activity swiftly enough.

Although technology is a big part of the problem, it's also certainly our best hope of a solution.

Addressing this challenge requires both public and private sector support, with close collaboration between industry, government and regulators. At the Centre for Finance, Innovation and Technology (CFIT), we're working with over 70 leading experts in financial crime ranging from global banks, tech firms, Government agencies, policymakers and academics, to develop a Digital Company ID.

Think of it as a digital passport - a secure way to give every business a unique and verified identity. In plain English, we're trying to make it easier for financial institutions to know who they’re dealing with, spot inconsistencies, flag suspicious behaviours, and lock bad actors out of the financial system – protecting consumers and businesses themselves from becoming victims of fraud.

But this is not straightforward to achieve.

While CFIT and its coalition partners are building a working prototype of a Digital Company ID, other steps are required to make this a reality.

Firstly, we need the right policy environment. Government must enable data sharing across the financial ecosystem, working with industry to develop models for permission and governance.

A lead authority should also be tasked with overseeing the accreditation and oversight of the Digital Company ID, with CFIT and industry partners supporting implementation. But clear leadership is required to ensure coordination and accountability.

Without common standards, fragmentation will persist. That's why CFIT is working with the public and private sector, to develop domestic and international standards that ensure systems work smoothly together.

We also need to fast-track use cases where Digital Company ID can have an immediate impact.

We must ensure existing regulation is fit for purpose and remove any unnecessary requirements that could hinder its adoption. And finally, Government must lead the way by adopting Digital Company ID in areas like procurement and tax, to drive market confidence and accelerate private sector adoption.

This isn’t just a fintech upgrade for the UK. The Digital Company ID will be one of our first lines of defence against economic crime, and key to protecting the integrity, resilience and health of the UK economy.

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Nicole Sandler is the Head of Corporate and Regulatory Affairs at the Centre for Finance, Innovation and Technology (CFIT)

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