The Complex Fraud Landscape Facing Financial Organizations
By Matt Tengwall
Posted in Customer Engagement
While the term "fraud" can be used in a variety of applications and industries, its dictionary definition is clear and concise: wrongful or criminal deception intended to result in financial or personal gain. The possibility and consequences of fraud are alarming to executives in a number of markets--but banks and other financial institutions are probably the most alarmed of all.
The monetary nature of banks makes them a favorable target, and the statistics show that the risk is only increasing: According to the 2017 American Bankers Association Deposit Account Fraud Survey Report, attempted fraud against bank deposit accounts reached $19.1 billion in 2016, up from $12.9 billion in 2014.
Understanding this complex fraud landscape and mitigating the risk can be broken down into three components:
Identifying Key Threats
While some types of fraud have become manageable over the years, other methods are now emerging: "I think the most recent and significant threat has been the total inundation of fraud attacks on ATM networks and how difficult that has been for a lot of institutions to deal with," said Kevin Sheridan, General Manager, Convergint Technologies.
ATMs were not always considered the highest-risk touch point for banks, but new techniques such as jackpotting--installing malware onto an ATM--are causing significant losses.
Additionally, the amount of personally identifiable and sensitive data banks obtain continues to present the opportunity for identity theft. And the threat of breaches to this data and the devices used for safety and storage has placed an increased awareness on the cyber risk: "There are many financial institutions that are investing time in researching the security of the actual technologies--we're seeing a much larger emphasis on that than we ever have before," said Sheridan.
Financial organizations must leverage the maximum amount of data possible from sources such as video, intrusion, and access control systems to achieve effective IT and physical security. Forward-looking banks are able to monitor all people entering a facility, and this will eventually rise to a point where institutions can manage the identity of a customer. "The amount of data being captured is going to enable customer identification to happen on a very broad scale," said Sheridan. Technologies such as artificial intelligence, video analytics, and biometrics can be used in the future to identify fraud before it's perpetrated.
Sheridan said that financial institutions must work together both internally and externally to mitigate fraud. HR, IT, and physical security teams should collaborate within the facility--and organizations must select quality integrators and partners who understand how to use data to actually create results. "There's a lot of technology available, but picking solutions that actually deliver value beyond a 'wow factor'--that's where we see institutions making smart decisions," he said. Combining a number of data inputs such as video, video analysis, transaction information from teller lines, and branch interactions will provide virtually limitless intelligence.
The increasingly complex and severe fraud threat to financial institutions can create significant losses if not controlled. These organizations must invest in processes and technologies to proactively determine risks, manage fraud effectively and efficiently, and have employees, assets and the brand comprehensively converge to create the best protection possible.
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