August 2014 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.

Highlights from Global Economic Crime Survey


The Financial Services (FS) sector results from PwC’s seventh Global Economic Crime Survey 2014 are intriguing since 45% of Financial Services organizations have suffered economic crime during the survey period, compared to only 34% across all other industries.

Key finding from the survey are:-

  • Money laundering ranks just behind asset misappropriation and cybercrime as the biggest form of economic crime – and it’s unique in the sense that the effects are felt, not through direct financial loss, but through loss of reputation.
  • 50% of FS respondents in Western Europe and Africa cited money laundering as their highest risk in doing business globally, compared to bribery & corruption and anti-competition law.
  • Money laundering is almost five times as likely to occur in the FS sector compared to other industries.
  • Doubts over the effectiveness of whistleblowing policies still remain – 16% still don’t know whether their whistleblowing mechanism is effective or not. And a further 7% believe it is ineffective, including 10% from Western Europe and 6% from Asia Pacific and Africa.
  • It is far better for Financial Services organizations to take a circumspect and informed approach to operating in emerging markets than to fall foul of regulators after the event – especially as recent regulatory releases and press reports seem to suggest that the FS sector is beginning to experience increased regulatory scrutiny with regards to the U.S. Foreign Corrupt Practices Act (FCPA) and other similar areas of compliance.
  • The percentage of respondents whose organizations did not perform annual Fraud Risk Assessments (FRA) has increased from 18% to 25%.
  • Cybercrime is still the second most common type of economic crime reported by FS respondents (after asset misappropriation) – 38% in 2011 vs. 39% in 2014.
  • 41% of respondents believe it is likely that they will experience cybercrime in the next 24 months (including 45% in Africa and 36 % in Asia Pacific). This compares to 26% in other industries.
  • FS respondents perceive a greater increase in the risk of cybercrime compared to counterparts in other industries (57% in FS vs. 45% in other industries)
  • Cybercrime is growing and the methods are constantly evolving – no abatement is seen in attacks on banks’ infrastructure.

Source: PWC

Challenges & Opportunities in Electronic Payments Fraud


The risks of electronic payments fraud are real and multiplying every day. In 2013, three out of every five organizations were subject to attempted or successful payments fraud, according to an Association of Financial Professionals survey, and 63 percent of organizations reported either adopting new security measures or plans to do so in the near future. As check, ACH, wires, and credit/debit cards are increasingly vulnerable to a growing array of fraud risks, banks are challenged to provide a sophisticated technology strategy for fraud detection and prevention.

Criminals today coordinate fraud schemes across all transaction channels and threshold detection systems often cannot keep up with the wide array of attacks on data and data sources. The wide range of access points for financial information -- including smartphones, tablets, office, and home computers -- gives fraudsters an array of options to plan and execute their attack. To keep up with this rapidly growing threat, banks must evolve from the traditional, siloed method of fraud detection to a proactive, analytic approach.

A strategic approach to electronic payments fraud prevention will help banks move away from the ineffective and inefficient manual processes still widely in place today. Many institutions perform manual reviews of transactions prior to initiation, an approach that is laborious, not scalable, and significantly more error-prone than an automated strategy. For electronic payments fraud prevention strategies to be successful, the processes must be tightly integrated with transaction processing systems. This integration enables real-time interdiction and creates tailored actions that are called automatically, based on policy. Automated systems can provide a more comprehensive view of customer behavior by leveraging analytic calculations and algorithms to detect and flag suspicious payments activity. Furthermore, these capabilities deliver very low false positives.

Despite considerable advances in digital payments technology, the risk of financial fraud remains and, in fact, is growing daily. For banks to stay ahead of these increasingly sophisticated criminals, robust, responsive, and automated technology is the key. Banks that implement an integrated real-time fraud detection and prevention system with data analytics capabilities will be well positioned to repel malicious attacks using their strengthened electronics payments fraud defenses.

Source: Information Week

Skimming of ATM cards still going on, depositors warned in Philippines


Despite safeguards taken by banks and security officers' warnings to customers, theft of deposits through various “tricks” in ATM machines continues in Philippines. One bank manager was recently shocked to discover P80,000 lost from his account even though he had not withdrawn anything. He said he only noticed the loss when he sought a bank certificate in connection with a US visa application.

Based on bank records, someone withdrew thrice in two days - a total of six withdrawals - from his account in two different places hosting ATM booths. The bank in question had to return his money.

According to the police, "skimming" cards or cloning information from a victim's ATM card to a syndicate's device attached to an ATM machine is not a new racket. The police chief showed how a syndicate's device can read information once an unsuspecting victim enters his/her card into a machine. The device reads the data and copies details of the account. They also place a camera so that the code or PIN number can be seen.

Many people have been victimized by this crime, and some people in the past lost as much as P300,000. One of the victim said that he himself interviewed so people will be aware of the scam and not fall prey. "This can happen with any bank."

Source: Interaksyon

Fraud landscape in Africa


Financial Fraud has perpetrated the banking industry in big way. As more people use the Internet for their banking needs, the number of fraudsters eyeing online financial transactions has also multiplied. Fraudsters have not only perpetrated direct channels but have also gained entry within the banking system as insiders. In Africa though, online fraud has proved to be one of the most pervasive forms of financial fraud.

This infographic below details out the fraud landscape in Africa and how use of innovative anti-fraud technology mitigates & prevents frauds from taking place in real-time.


Fraud landscape in AFrica


Source: CustomerXPs

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