Every financial institution has anti-fraud measures in place, but how do you know if your efforts are working? You may assume that if you haven’t suffered any significant losses from fraud or any data breaches that your environment is secure, but unless you’re sure you have the right fraud detection and prevention strategies in place, a big attack could be waiting around the corner at any minute.
To protect your financial institution and your customers, you need to review your anti-fraud processes on a regular basis. Let these tips guide you through the review process.
Identify the Most Significant Risks
Take a top-down approach to your anti-fraud processes review by looking at your risks first. What type of fraud are you most likely to face based on industry and localized concerns?
Depending on your unique situation, your list may include check fraud, loan fraud, deposit fraud, and money laundering as well as internal fraud such as a manager funneling money to their personal account by making fake payments to a fictitious vendor.
List the Symptoms of Each Type of Fraud
Once you identify the most significant risks for your financial institution, narrow in on the symptoms of each type of fraud.
If you’re focusing on a manager making false payments to a fictitious vendor, for example, the symptoms may include:
- A vendor with the same address as an employee
- Payments that don’t match up with a purchase order
- Large transfers in even dollar amounts
- Small transfers for unusual amounts
- A single vendor with expanding payments over several months
Similarly, the symptoms of check fraud may include out-of-order check numbers, missing information, forged signatures, or unusual deposits followed by significant withdrawals to name just a few.
Analyze Your Fraud Detection Processes
At this point, you need to look at the processes you have in place to detect the symptoms you have identified. For instance, if someone deposits a check with a forged signature, do you have a program that will notice? If not, you need to develop a fraud detection process that can analyze transactions for that symptom of fraud. Work through all of your symptoms in this manner.
Look for Control Weaknesses
In addition to putting anti-fraud measures in place, you should look at your controls and try to spot weaknesses. To continue with the example of check fraud, do checks written for over a certain amount on a new account get flagged for manual review? Do you require your tellers to get manager’s approval on checks that meet certain profiles? These are the types of questions you need to ask when assessing your controls.
When assessing controls related to internal fraud, you need to ensure that you have a system of checks and balances that prevent any single employee from having unbridled access to too much information. Do you segregate duties? Do you require all employees to take a certain amount of time off per year with no access to work email or accounts?
Looking for control weaknesses is just as important as analyzing your dedicated anti-fraud strategies.
Decide Where to Focus Your Time, Money, and Energy
As you develop a list of the symptoms of fraud, you may feel overwhelmed, but keep in mind that you don’t have to tackle everything right away. You simply need to focus on the most significant threats.
What type of fraud is likely to cost your financial institution the most money? Which types of fraud are likely to draw unwanted attention to your financial institution and get your name in the paper? Consider these questions as you develop anti-fraud processes to ensure you put your time, money, and energy into protecting your financial institution from the most relevant risks.
Audit Your Processes
On a regular basis, you need to audit your processes. Find out what is working and identify areas where you need improvement. Beyond just looking at your fraud detection and prevention strategies, you should also look at how your team is working together.
To be effective, anti-fraud measures need top-to-bottom support. Your management team should understand the importance of funding anti-fraud solutions, while your front line needs to commit to following through with your processes.
Your audit should reveal your weaknesses and help you determine the best direction forward. Ideally, you should focus on eliminating redundancies and automating as much as possible. You should also try to find out where you may be wasting resources and upsetting customers with processes that generate false-positives.
Invest in Quality Anti-Fraud Solutions and Services
To ensure the review of your anti-fraud processes is as effective as possible, you should consult with a third-party. They can provide you with a level of objectivity and distance that you cannot get with an in-house review.
Want help reviewing your fraud process? Then contact us today. At SQN Banking Systems, we offer a fraud process review that can help you determine what’s working and where you need more help.
Our fraud detection and prevention services rely on machine learning so that you can reduce false positives and improve customer satisfaction, while strengthening your anti-fraud measures. Let us handle fraud so you can focus on the other aspects of running a successful financial institution.