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Emerging Fraud Trends and Fraud Prevention


Emerging Fraud Trends and Fraud Prevention

In today’s digital world, the biggest fraud threat is criminals using our identities for their own financial gain. This happens at the expense of financial institutions and at our own expense. It is important to understand the emerging fraud trends together with the need for fraud prevention. Therefore, organisations should prioritize fraud risk prevention.

Fraud prevention starts with assessments and ensuring the organisation’s fraud framework is comprehensive and up to date with global best-practice standards. Given the dynamic nature of fraud, it’s important to have a program in place to continuously assess for ongoing improvements.

Fraud affects our everyday lives and costs the banking and financial industry billions of dollars every year. The knock-on effect is that it causes our costs and expenses to increase. For example, interest rates, fees, and insurance premiums. Banks are required to invest significantly into fraud prevention programs, including both software solutions and human resources. Customers expect their banks and financial services providers to keep their personal information and their accounts safe. There are several measures organizations should be implementing to safeguard their customers’ identities and prevent fraudsters and criminals from accessing the customers’ money.

Digital-led experiences will continue to grow in popularity. Companies that act quickly and innovate in their delivery model to help consumers navigate the pandemic safely and effectively have a strong advantage. Creating a good first impression is key in business and for many, this means ensuring digital customer onboarding processes and financial transactions run smoothly and friction free.

Emerging Fraud Trends and Fraud Prevention

The result

Nearly every month, a news story about a big security breach, a successful hacking attempt or a significant personal data breach has occurred. Unfortunately, there is a serious risk that hackers and fraudsters use this personal data to impersonate people and commit fraud.

So, with more organisations basing their services in the cloud, big data breaches are getting bigger and happening more often. However, despite increased focus on cyber security and data breach prevention, through Information Security Management System programs like ISO 27001, fraudsters, hackers, and financial criminals continue to challenge data security. Consequently, they are devising increasingly inventive ways of stealing data and committing financial fraud. Unfortunately, there is no way of retreiving personal data, or controlling who will receive it and try to use it once it is leaked to the internet.

What is the solution?

Therefore, when it comes to personal information, organisations need to implement increasingly sophisticated verifications. As a result, this will ensure that genuine customers, and not criminals, are using personal information to access financial services. Pretty much every year, going back to 2013, there have been data leaks from big global companies. Most of them into the hundreds of millions of customers and sometimes into the billions. These companies include retail stores, email companies, social networking companies, credit bureaus and hotel groups. Hackers target these companies due to the amount of personal and credit card information held about their customers. So, when their data falls into the wrong hands, the results can be disastrous.

As a result, the overall impact could be major reputational damage. Including reputational loss for the bank or organisation, and reputational loss for the customer. Let alone potential loss of dollars for both parties as well.

What can organisations do to protect themselves and customers against fraudulent activity?

Internal controls organizations should consider implementing to minimize internal fraud and prevent identity information leakage:

Provide employees a process to report any suspicious activity.

This could be an email address where an employee can log an incident related to fraud that would otherwise go unnoticed.

Conduct police and background checks on new employees.

Most internal fraud is committed by repeat offenders. So, do your background checking on potential employees.

Induction and regular training should cover the importance of information security.

Make sure data privacy is a part of your employees’ everyday work ethic.

Create monthly fraud awareness posters in your workplace.

These can be used to reinforce the importance of internal compliance and preventing data leakage from your organization.

Protect your password.

Don’t write your password down. Instead, memorize it, use a password manager, or store it in a password protected document. Don’t share user IDs and passwords with other employees. And if you suspect someone has become aware of your password, change it immediately.

Encourage the use of strong passwords.

Use passwords with upper case, lower case, numbers, and special characters. Don’t use words and numbers (e.g., date of birth) that may be easy for a fraudster to guess.

Cover all Fraud Avenues.

Ideally, use a single fraud platform to ensure the optimal use of data and complete customer view:

  • Onboarding – prevent application and intermediary fraud and mule account opening
  • Internal – prevent procurement and collusion fraud
  • Transaction – prevent external party fraud, ID, and account takeover fraud
  • External – scams and invoicing fraud
  • Ensure comprehensive fraud frameworks, knowing that fraudsters will quickly identify and exploit any gaps.
  • Organizational structure. Provide skills and experience for fraud prevention professionals. Establish dedicated function for financial crimes prevention
  • Operational processes
  • Staff training
  • Customer education programmes
  • Policies.

Utilise an innovative real time fraud solution.

Use a Dynamic Rules Engine as well as Machine Learning. Enable flexible data models, sophisticated alerts and case management capability to prevent fraud.

Ultimately, the key component for fraud deterrence in any organisation is to have roles and responsibilities clearly defined. Ensure that there is no easy avenue for a fraud attack.

Ultimately, it is important to understand the emerging fraud trends together with the need for fraud prevention.

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