As the coronavirus has worked its way around the world, bank fraud has been growing at a faster rate than usual. Is your financial institution taking adequate steps to protect itself or are you inadvertently increasing your risk of facing fraud? To assess your vulnerability, make sure you’re not making these common mistakes:
1. Fighting Fraud in Silos
Unfortunately, many banks address fraud by fighting spot fires. In other words, they look at each situation on its own, or they approach fraud over different channels in silos. This approach allows a lot of fraudulent activity to slip through the cracks undetected.
To detect fraud effectively, you need a multi-channel approach that combines all your anti-fraud activities. Ideally, as banking becomes increasingly digital, fraud management and cybersecurity need to meet.
2. Failing to Consider Consumer Security Risks
Most banks focus on their institutional risks, but many fail to consider consumer-based security risks. To protect your bank from fraud, you need to consider both.
Are your customers savvy about fraud? Do they know how to minimize their own risk of fraud? If not, what steps can you take to ensure they act more safely?
Although your customers may be legally liable for certain types of fraud that happens on their accounts, they may not be liable for all types of fraud, and even if they are liable, they may walk away from their negative bank accounts and leave you to suffer the loss.
3. Solely Focusing on Digital Security
In that same vein, you cannot just focus on digital security. Scammers don’t want to work that hard, and by extension, they go for the weakest link — humans. This may include sending phishing emails to your employees to convince them to provide access to documents or accounts. Or, it can involve convincing customers to take actions that open them to a risk of fraud.
Your financial institution needs to invest in high-quality, anti-fraud digital tools, but this cannot be your only line of defense. Make sure that you are also educating your employees and customers about how to avoid social engineering attacks.
4. Not Noticing Shifts in Fraud Techniques
In the past, scam artists tended to focus on card-centric fraud that happened at the point of sale, but this type of fraud is not that lucrative because it only allows the thief to do one transaction at a time. To increase their gains, scam artists are increasingly focused on account takeover and opening new accounts.
To ensure your fraud detection and prevention measures are as effective as possible, you need to stay abreast of changes in fraud patterns, and you also need tools that can help you stay flexible in your approach.
5. Only Looking at Monetary Transactions
Most fraud detection solutions look at monetary transactions. In other words, they look at the money being spent or received from an account, and they flag suspicious transactions.
Effective fraud management needs to go a step further and look at nonmonetary transactions. With account take over, in particular, the scam artist’s first actions are nonmonetary. For example, they may change the email or mailing address linked to an account.
While these types of changes are certainly not always an indicator of fraud, they can be a red flag. Ideally, you should have a system in place to look for key signs of fraud. For instance, if multiple accounts all get changed to the same email or mailing address, that is a definite sign of account takeover.
Will your current system bring those issues to your attention? If not, it’s time to upgrade.
6. Reviewing Non-Monetary Changes in Batches
Some financial institutions review nonmonetary changes, but they look at the issue in batches. For instance, their system may be set up to review these changes once a day or once a week.
Most fraud happens within 24 hours of the account takeover. To minimize losses, you need to look at account changes in real-time.
7. Not Using Artificial Intelligence
If you’re manually reviewing all signs of fraud, you may be wasting resources while also increasing your vulnerability. To save time and reduce your risk, you need to be leveraging AI.
AI or machine-learning tools don’t just use a static rule set to look for signs of fraud. Instead, they use a dynamic rule set that looks at multiple data points to get to know customers’ behavior and look for aberrations that may indicate risk.
8. Forgetting to Look for Phishing Websites or Apps
Scam artists often create apps or build websites that mimic your financial institution’s products. For instance, they may send your customers a phishing email that directs them to a fake website. Then, when your customer enters their sign-in details, the thief takes that information and uses it to gain access to their accounts.
To protect yourself, you should be on the lookout for fraudulent websites or apps. If you find anything suspicious, notify the Fair Trade Commission (FTC) immediately.
9. Not Prioritizing Anti-Fraud Measures
To fight fraud, you need to invest in anti-fraud solutions and processes. Consider tracking the percentage of fraudulent transactions to legitimate transactions and use this number to assess your fraud-fighting tactics.
If you use a tool that brings this ratio down, you can rest assured that it’s a positive investment. If not, you may need to adjust your approach and explore other options. In all cases, you need to make fighting fraud a priority in your business.
At SQN Banking Systems, we can help you avoid these common mistakes by providing you with fraud detection and prevention tools that rely on AI and machine learning to detect fraud as quickly and as effectively as possible across all your payment channels. To learn more, contact us today.