Global Trends in Fraud Prevention and Detection

According to a 2013 report published by the ICFE Fraud Magazine, 46% of the identity fraud reported globally involved breaches of government documents. 20% of all complaints were related to breaches of data of financial institutions. An RBI circular of November 2014 reported that in some cases, even though the original cheques were in the custody of the customer, cheques with the same series had been presented and encashed by fraudsters. According to the National crime records bureau statistics, the total number of cases of cybercrime registered in India in 2013 was around 4,356 and 2098 arrests were made in this regard. In India alone, frauds worth 11,022 crore INR were reported in public sector banks between April–December 2014 and over 2000 cases of fraud were reported to the RBI.

Government Regulations to prevent frauds

The regulations and laws governing the financial services sector in India are gradually developing. With new and robust ways replacing old and traditional methods of dealing with frauds, banks can now manage risk more efficiently. While the number of fraud cases has declined from 24,791 cases in 2009–10 to 13,293 cases in 2012–13 i.e. a 46% drop, amount involved in the fraud has considerably increased from INR 2037.81 crore to INR 8,646.00 crore, an increase of a whopping 324%. The increased usage of mobile phones in financial transactions has prompted the RBI to issue operative guidelines to regulate this channel by suggesting reporting of suspicious transactions to its intelligence unit. The Insurance Regulatory and Development Authority (IRDA) has issued an Insurance Fraud Monitoring Framework (IFMF) to minimize the frauds in the insurance sector. On the technological front, there are various automated tools available in the market which can provide protection from frauds.

Top trends in automated solutions
Automated analysis tools: The Banking industry today has become increasingly cognizant of the need for an automated analysis tool that could identify and report fraud attempt on a regular basis. Real-time screening, third-party screening, and compliance solutions are some of the options.

Vulnerability calculator solutions: There are solutions available in the market which analyze the vulnerability of a financial institution to the happening of a fraud. These tools provide a reasonable action plan as a shield against fraud.

Behavioral analytics: Many times, a fraudster disguises themselves as a customer to the bank. The behavior analytics tool tracks customer activities and reports any suspicious behavior observed. This tool helps identify fraudulent activity in real time or even after it has taken place.

Data visualization tools: These tools represent complex data patterns into visual forms such as pictures and graphics, to help better understand multidimensional data.

Deep learning: A new approach to money transfer method, deep learning utilizes artificial intelligence and machine learning to identify complex patterns and characteristics of cybercrime and online fraud.

Constituents of an effective anti-fraud programme

Every organization can secure itself from untoward fraud incidents if they take care of these key points.

· Conduct periodic reviews and transparent management reporting

· Build a well-defined and tightly knit governance fabric

· Develop clear policies and procedures in order to supervise business

· Collect and process data effectively from all data sources

· Strategically employ and place experienced staff to enable strict monitoring

Other fundamental antifraud solutions

It is incumbent upon banks to conduct a thorough check of employees and associates they work with. The management front office staff should be educated about identifying and maintaining genuine clients and trustworthy suppliers & partners. Never underestimate the KYC checks such as PAN verification, voter id verification and aadhar verification of your customers. Financial institutions often face challenges in maintaining the efficiency of anti-fraud security controls at an enterprise-wide level mostly while integrating channels like online banking or ATM transactions or challenges within applications and tools. Organizations need to be informed about the latest technological and procedural vulnerabilities and fraud schemes, to be able to think ahead of the fraudsters.

Apart from implementing administrative controls, financial institutions also need to educate their customers. Since the channels used by fraudsters to target sensitive financial data are ultra-sophisticated and ever-changing, it’s time to look at the existing security controls with a new perspective.