Building a better banking world
The benefits of a unified approach to fighting fraud
There’s a reason why many industry analyst firms such as Chartis Research and Frost & Sullivan are evaluating anti-fraud technologies based on their ability to provide an integrated, platform-based approach: It’s simply the best way to get the most accurate, complete and cost-effective picture of fraud within an organization. Yet the norm is still multiple anti-fraud and anti-money laundering systems across various business units.
A unified framework for handling financial crimes allows an organization to manage fewer vendors, enhance operational efficiency and ultimately reduce fraud. In a perfect world, everything must be handled within an enterprise framework where the right information is reported to the right people at the right time.
As banking evolves with new business channels, these channels can pose new risks. The first concern is to know and authenticate customers so you know whom you’re doing business with. This is easier said than done, which is why a layered defense should be used. Banks must take a 360-degree view of their customer using all available information. And then, when it is time to roll out new products, fraud risks must be incorporated before going to market.
Fraud isn’t always top of mind, and it needs a seat at the table. Some are moving into this process and addressing mitigating factors, but it’s been a slow process. No-doc loans are a good example; there was tremendous risk, but the revenue outweighed the risks.
Start with the data
Banks will continue to build service-oriented architectures to reduce application redundancy, ensure data integrity, facilitate data sharing and lower overall maintenance costs. Including all available data, along with predictive analytics, will be essential for the effective evolution of fraud management. An enterprise data model that understands cross-channel products, lines of business and industry-specific items to better manage operational needs should push some significant improvements in scoring customers and reducing financial crime risk.
Build the right models
You should be able to go back post-event and use rich information to build better models, generate trends and forecasts, and determine how new products and lines of business will affect financial crimes and the operational environment. You also should be able to incorporate all available data types – customer, household, merchant, third-party and issuer-specific data, authorizations, deposits and non-monetary transactions – into the analytical process.
Change the rules
Enterprise fraud management must have routing and case management rules, as well as the ability to capture fraud, enforce AML policies and flag transactions needing review. Analytics is critical; especially those technologies capable of discerning complex data patterns and using sophisticated decision models to better manage false positives. In addition, organizations should have the ability to load-share, balancing technology and employees’ skills, to allow collaboration and find new areas of fraud. That process must include real-time monitoring and real-time action to stop fraudulent transactions as they happen.
Find the edge
New investigative tools like social network analysis also need to be adopted. Many fraud cases demonstrate that banks aren’t seeing the forest for the trees, especially in the world of first-party fraud and credit loss. Social network analysis helps investigators by representing complex, previously hidden relationships in a visual way. It proves the old adage that a picture is worth a thousand words. Lastly, it is critical to establish a corporate infrastructure that encourages collaboration by allowing different groups to supply rules and expertise to a centrally managed fraud detection environment instead of only being able to share cases and reports.
There will always be fraud, but banks now have the ability to take the upper hand and better manage and control losses.
Ellen Joyner-Roberson is the Global Financial Services Marketing Manager at SAS.