To protect your financial institution from fraud, you must be vigilant in your fraud detection and prevention efforts. But in addition to considering external threats, you also need to think about threats from the inside. Use these strategies to minimize your risk of becoming a victim of internal bank fraud.
1. Require IT admins to sign in using their own credentials
IT administrators historically access networks using generic logins, making it impossible to track their actions. Make these employees or contractors use their own credentials so you can create an audit trail.
Also, check user access profiles on a regular basis. Look for red flags such as employees with higher-level access than they should have. And go through records to see if anyone was temporarily given extended access that would allow them to commit fraud more easily.
2. Monitor employees
Ideally, you should have software in place that allows you to monitor your employees’ actions while they’re using the bank’s IT system. This solution should alert you when suspicious actions take place.
Note that you typically cannot monitor employees covertly. You must let them know they are being monitored. Always check the laws in your area before you start monitoring.
3. Require employees to log out when they leave their workstations
If someone with high-level access leaves their computer unattended while they are signed in, a nefarious employee could steal their credentials or initiate fraud from their computer. To avoid this threat, make sure employees understand the importance of logging out, even if they’re stepping away from their desks for a short time.
4. Use behavioral profiling when monitoring transactions in real-time
An employee who wants to commit fraud may take over inactive accounts, draft checks from a customer’s account, transfer money, or steal funds in other ways. Employees know how to get past the static rule-based fraud detection filters, and to detect fraud committed by these insiders, you need to use behavioral profiling.
Behavioral profiling leverages large amounts of data to get to know an account holders’ typical behavior. This technology also has an understanding of the differences between legitimate and fraudulent transactions. When you have these types of tools in place, you’re more likely to detect internal threats to customers’ accounts.
For example, if two employees sign in to the same computer quickly, that may be unusual behavior that should be flagged by the system. Or, another example is if an employee initiates several transactions under the level that triggers the need for management authorization.
5. Utilize relationship discovery
Some internal fraud involves collusion with outsiders. Systems that can perform relationship discovery look for patterns of links between employees and outsiders. Also called entity-link analysis, these tools can help you detect fraud being committed by employees and outsiders.
6. Insist on real-time solutions
Legacy fraud detection tools run at a lag. But contemporary tools analyze transactions in real-time. You must insist on real-time solutions if you want to detect internal fraud before it is out of control. In a lot of cases, real-time solutions can detect fraud and stop the transaction before it occurs.
7. Do internal audits
Make sure that you’re adequately auditing your accounts. Internal audits coupled with management reviews can be an effective way to spot signs of internal fraud. Rather than simply going through an accounting audit, consider consulting with a certified fraud examiner.
8. Educate employees about the signs of internal fraud
Your employees can be one of your biggest assets when you’re trying to detect internal fraud. Educate employees about the red flags of internal fraud. Let them know what actions may indicate internal fraud. Also, reduce the temptation to commit fraud by letting employees know about the severe consequences for these crimes.
9. Set up communication channels to report internal fraud
Co-workers and even customers can often tell when someone is committing internal fraud, but they don’t necessarily want to report their information. They may be afraid of the repercussions. Consider setting up a communication channel such as a whistling-blowing hotline or a website that allows people to report their suspicions anonymously.
At SQN Banking Systems, we focus on fraud so that our clients can focus on their business. We offer a range of tools and solutions that leverage machine learning and artificial intelligence for real-time fraud prevention and detection.
To learn more about how we can help protect you from internal and external fraud threats, contact us today.