The best advice on how to deal with bank fraud emphasizes the importance of being proactive, rather than reactive. This approach is critical. A proactive fraud posture means that you focus on detecting fraud before it happens rather than discovering it afterward.
By being proactive, you reduce your financial institution’s overall fraud, and you save money on fraud remediation costs. But what about those situations where fraud sneaks past your prevention efforts? How should your financial institution deal with fraud remediation? Check out these critical strategies.
1. React quickly.
Once fraud has been detected, you don’t have time to waste. You need to react as swiftly as possible. This includes both stopping and reporting the fraud.
2. Create fraud remediation policies.
To react quickly, you need well-established policies. You should map out exactly how your financial institution is going to respond to different types of fraud. If you’re planning your response in the moment, it will be slow and disorganized. That is the worst thing in this situation.
Get your fraud team together and brainstorm. What do you need to do to stop different types of fraud? Do you need to block certain types of transactions? Freeze accounts? Add additional security or authentication measures?
Who do you need to alert when fraud occurs? How do you reach customers about suspected or detected fraud on their accounts? When do you need to notify local law enforcement? How do you deal with internal fraud? Do you have a process for investigating employees without risking wrongful accusations? These are the types of questions to consider as you create your fraud remediation policies.
3. Don’t introduce friction into the customer experience.
As you develop your fraud response strategies, review them to make sure that they don’t introduce friction into the customer experience. For instance, imagine that your bank is the victim of a data breach. You’re not sure what happened so you freeze all customer accounts.
For hours, your customers can’t make legitimate transactions. They feel frustrated and upset. This will hurt your reputation, and even the customers who weren’t affected by the data breach may close their accounts and look for a new bank. Although this is an extreme example, it highlights the importance of safeguarding the customer experience even in the wake of fraud.
4. Keep customer contact info updated.
When you’re trying to contact a customer about fraud on their account, you need to be able to reach them. This requires you to keep their contact details up to date. You need to take a proactive stance on this issue.
Prompt customers to update or verify their contact details when they sign into your banking app. If you get returned mail, bad emails, or disconnected phone numbers, reach out to your customers through their other contact methods and update the incorrect information.
Dormant accounts carry a heightened risk of fraud. By updating contact information, you help to streamline remediation after fraud occurs, but simultaneously, you also reduce the risk of fraud on dormant accounts.
5. File a Suspicious Activity Report (SAR).
With certain types of fraud, you need to file a Suspicious Activity Report (SAR) within 30 days of the incident. You can take up to 60 days if you haven’t identified a suspect within the first 30-day period. Again, to save time and reduce costs, you need to make sure that you have a process in place for meeting this requirement.
For instance, you should ensure that your financial institution is registered with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Then, you need to ensure that you understand which information you can share. Section 314(b) of the USA Patriot Act allows you to share more information in these situations than you normally would be allowed to share with other banks.
However, you still need to ensure that you don’t share privileged information. You also need to ensure that you share these fraud details using safe communication channels. If your fraud mitigation team doesn’t understand the rules, they may introduce delays into this part of the process. Or even worse, they may end up not being compliant with the laws, putting you at risk of fines or penalties on top of the cost of dealing with the fraud.
6. Be proactive about protecting your reputation.
Regardless of the size of your financial institution, word will spread about the fraud, and the reputational damage can be significant. Make sure that you build in ways to protect your reputation after fraud occurs.
For instance, if a customer becomes a victim of fraud, what will you do to make them feel confident about your bank? Will you tell them how you have fixed the issue so that it won’t occur again? Will you offer them identity theft protection assistance?
What about the media? You need an articulate representative that knows how to artfully answer questions in a way that shows your bank in a positive light. In that same vein, you need a social media strategist that can put out reputational fires online.
7. Follow regulations.
When dealing with different types of bank fraud, you may have to follow a variety of regulations. Make sure that you understand the regulations and follow through with them. Failure to do so can lead to millions of dollars of fines. For instance, one bank recently incurred a $250 million fine because it failed to follow regulatory guidance about how to deal with customers who had been hurt by internal bank fraud.
At SQN Banking Systems, we provide clients with the tools and solutions they need to protect themselves from bank fraud. While developing a fraud remediation strategy is critical, you also need to take a proactive approach to prevent fraud. Our real-time, AI-powered, machine-learning fraud prevention tools can help.
Ready to protect your bank and improve fraud prevention for your customers? Then, contact us today. We can review your current anti-fraud posture and help you find the best way forward.