Financial services: Real-time fraud countermeasures
Over time, each organization has to consider the trade-off between putting in checkpoints for transactions and keeping up the pace of business activities. “If you are going to require approval for expenses over a certain level, you need to make sure it does not slow down the purchaser too much,” Brethenoux explains. “Ideally, the amount saved in fraud will not exceed the amount lost to unfulfilled transactions.”
EFT protection
Nationwide Building Society, a U.K.-based bank, offers checking and savings accounts, credit card services, mortgages and insurance. With multiple access channels, Nationwide was concerned about the increasing danger of fraud. In addition, new regulations for faster payment established in 2008 meant that more transactions were occurring in real time, placing pressure on the bank to detect fraud equally quickly.
After looking at a variety of fraud detection and prevention products, Nationwide found that a series of products from Actimize best fit its needs. The speed and cross-channel analyses were the two features that Nationwide found most compelling. The bank phased in various components of the Actimize solution, which detects fraud in cross-channel remote banking, commercial and retail electronic payments, deposits and ATM/debit cards. In addition, it has a component aimed at employee fraud.
The remote banking solution was the first to be implemented, and it resulted in a 90 percent decrease in online fraud. Attempts at fraud decreased as would-be fraudsters found the bank to have improved defenses. Transactions are monitored in real time, and suspicious activities are scored as high risk. The Actimize software can block such transactions immediately.
As the speed of banking transactions has increased, so has the importance of real-time detection. A top-five U.S. bank is using several products from Actimize to detect wire fraud and automated clearinghouse (ACH) fraud. The applications use data from the wire instruction to avert attempted wire fraud transactions, so that the fraud is prevented before the funds ever leave the bank.
About 73 percent of fraud attempts were detected prior to the completion of the wire transfer. In addition, real-time false positive ratios tend to be quite high, around 1:50, meaning out of 50 potential fraudulent transactions, one is a real fraud. With Actimize, the ratio is 1:15. Those are occurring in low-fraud environments where there are few attacks, so reducing the ratios to that extent is quite significant.
More vulnerable
The changing nature of banking has led to more opportunities for fraud. “Customers can now move money in many different ways,” says Paul Heninger, VP of products for Actimize. “They can make electronic fund transfers to many more payees than in the past, transfer from one account to another and wire money domestically and internationally.” The global nature of today’s banking also has had an impact. “A decade ago, a criminal had to be in the city where the bank was located to steal from it,” Heninger says, “but now he can be anywhere in the world.”
Similarly, the number of bank employees who can access the accounts has increased. “With the convenience of pervasive customer service has come additional vulnerability,” cautions Heninger. “And while the great majority of employees are honest, the ones who are not can harm the bank and its customers.” Collusive fraud, in which individuals coordinate to cover each other’s actions, can have an even more significant impact.
Emerging technologies such as smartphones have opened new doors for fraud. In January, Google withdrew 50 apps for its Android smartphone from its online market, out of concern that they might be malicious. They were “phishing” apps designed to obtain banking information from Android users. Most large banks now offer their customers the option of conducting bank transactions via their mobile phones, making that an emerging market for fraud.
Small financial services companies get boost from document management
JFS Wealth Advisors provides a comprehensive range of financial services, including personal wealth management, business retirement management, institutional consulting, and tax planning and return preparation services. With 32 employees, it is one of the largest, independent, fee-based wealth advisors in the country. Several years ago, the paper files required by JFS had begun to exceed the capacity of its file cabinets and storage area, so the company began planning the move to go paperless.
After talking with colleagues in the field and carrying out its own research, JFS selected CNG-SAFE from Cabinet NG. “We liked the file cabinet metaphor,” says Laura Blaire, chief operating officer for JFS, “because it could mirror our existing organization and looked familiar to our staff.”
The company took a careful approach to setting up the application in order to be confident that the interface and templates matched its needs. “We wanted to have a consistent system for organizing our data that offered the ability to create well-defined templates,” Blaire explains. “In addition, we reviewed and organized each file folder to ensure our scanning efforts were as efficient as possible and that we did not scan unnecessary documents.”
Easier to comply
Now that the information is stored electronically, access is greatly improved and meeting compliance requirements is easier. “We really like the search function, and having the system in place has made us more disciplined about how we save things,” notes Blaire. “In addition, when the SEC requests a document, we can easily copy it to a folder for them.” CNG-SAFE facilitates the backup and data security of those documents, which is essential for effective compliance.
James True, VP of business development at CNG, says, “In some cases, smaller financial services companies have hesitated in moving to a paperless environment because of concerns about compliance. Many of them do not have an IT department and, therefore, may lack the resources to implement a document management solution. We give the customer the option of a local client/server or hosted/SaaS cconfiguration, and the hosted model from CNG addresses that concern.” In addition, a new CNG-Online version of CNG-SAFE automates the backup and retention functions of document management.