July 2015 Issue

Our 'Newsletter on Financial Fraud' is your monthly insight into the various new fraud types and methods used by fraudsters globally in the banking space. 

In this issue, we bring to light the effect of banking fraud creeping in and making banks lose millions to this plaguing menace.

Phone Scams Rise 30% as Bank Fraud Goes Low-Tech

A recent study released by a security firm shows a 30% rise in phone fraud among financial institutions since 2013. The company analyzed calling patterns at financial institutions, credit card issuers and online retailers.

It found that one in every 2,200 calls made to financial institutions and retailers is fraudulent, as is one in every 900 calls to credit card companies. Overall, more than 86.2 million calls per month in the U.S. are phone scams.

According to the study, call center fraud costs financial institutions $7 million to $15 million a year. The losses come from fake wire transfers and other deductions from accounts.

In another twist on this theme, some banks that cater to high-net-worth clients are reporting an increase in "trusted-adviser fraud." This is where criminals pose as clients and direct an accountant or some other trusted adviser to transfer funds from the client's account.

Bankers are also worried about card fraud in the U.S. as it migrates to the EMV chip card standard. "Chargebacks are not a good proxy for whether or not you're a high-fraud merchant," said a senior banker. "Financial institutions will not charge back fraud if they don't see any hope of recovering from the chargeback. A very small portion of overall fraud is charged back."

The only real way for a merchant to know its fraud rate is to ask its acquirer, he said.

Also, more bank-oriented criminals are conducting semi-automated, hybrid attacks, he said.

"They're only automating the first part of the attack, in which you deceive the user, for example, if the user visits a log-in page and the malware says, please hold on while we do some security checks," he said. "The malware then sends all those credentials to a criminal, who will then create a new manual session using those stolen credentials."

Although this type of scheme is harder to expand quickly, it requires less investment in time, effort and money (due to the availability of low-cost labor), so criminals can more easily target smaller banks, which are more numerous.

   Source: American Banker


RBI coaxes banks for policy on tackling fraud

Citing commercial banks' failure to know about the people in the transactions chain as the root cause of financial frauds, the Reserve Bank of India on Friday said it is making efforts to convince banks to have a policy on tackling fraud.

"Though a whistleblower policy in banks from the vigilance perspective is already there, the RBI is trying to advise the banks that they have such a policy to prevent fraud as well," Deputy Governor R. Gandhi said while inaugurating a conference on "Financial Frauds - Risks and Preventions", organized by the Associated Chambers of Commerce and Industry.

"If a bank has to prevent fraud, it must follow the three KY Principles. It must know its customer, it must know its employee and it must know its partner," he said.

"Each bank should segment its customers based on their risk profile and transaction patterns and develop appropriate response systems for exceptional patterns noticed and fortify systemic level controls," he added.

He said that if frauds are to be prevented effectively, banks have to know their partners, agents and vendors and take extra care about continuous vigil on their staff.

"Background checking for antecedents, checks and balances, periodic rotations, vigilance assessments, internal audits etc. techniques will have to be employed to know the employees better and as preventive measures," Gandhi said.

Source: Business Standard

South Africans 'Wary' of Internet Banking

Banking on the internet has become a mainstream activity, but a study says many South Africans still believe that visiting a branch is safer than online platforms.

This is according to a survey in conjunction with B2B International that says 43% of South Africans feel that traditional over-the-counter transactions are safer than internet banking.

Conversely, an overall majority of South African bank customers (64%) feel vulnerable when conducting online transactions. Despite that, the study found that when people go online, they fail to take basic security measures to protect their accounts. Security experts have found that despite storing details such as logins, passwords and even IDs on smartphones, people generally fail to use strong passwords on their gadgets.

Criminals can compromise bank accounts by setting up a phishing page where people unwittingly hand over key details like usernames and passwords. Report found that despite fears over cyber-crime, 74% of South African internet users used computers for online payments, 22% used smartphones and 32% used smartphones. A report recently said that just three malware applications make up the majority of attacks on the financial system in SA.

Source: allAfrica

CustomerXPs hosts “Secret Sauce for Fighting Financial Crime” in association with CISCO

"How can I make my bank safe and keep those fraudsters out?”, “What are the latest approaches to enterprise fraud management in banks?”, “How can I pro-actively & quickly be compliant to ever changing regulatory norms?”, “Can compliance to regulations & enterprise fraud management go hand-in-hand?”

These are some common questions baffling bankers not just worldwide but especially in India, where the fraud scenario is pretty grim. According to the latest statistics published by Deloitte, 93% of bankers in India indicated that there has been an increase in fraud incidents in the last two years. Majority of the respondents also stated that the average time taken to uncover a fraudulent transaction was a little less than 6 months while they were only able to recover less than 25% of the lost amount.

In order to provide feasible solutions to such challenges, CustomerXPs, in association with CISCO, recently hosted an event “Secret Sauce for Fighting Financial Crime” at Hilton Mumbai on June 25, 2015. Senior bankers hailing from multinational banks as well as cooperative banks were amongst the invitees. The objective of the event was to discuss and exchange views on the recent trends and developments in Enterprise Financial Crime Management space.

Eminent speakers from the banking industry were invited to share their experiences on their fraud management journey and emphasize on the role of technology in combating enterprise financial fraud. Top-level executives from CustomerXPs and CISCO also spoke about the challenges faced by bankers in India and elaborated on building the bank of the future by implementing enterprise wide, cross-channel fraud prevention technology.

The event not only served as a great learning platform but also helped leaders from across the banking and technology industries to network and share ideas.

Source: CustomerXPs

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