January 2017 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.

Barclays to junk PINs, introduce finger and vein scanners to combat fraud


Barclays is launching a finger scanner for corporate clients and will roll out voice recognition for millions of retail clients next year as it steps up use of biometric recognition technology to combat banking fraud.

The British bank is set to use a biometric reader that scans a finger and identifies unique vein patterns to access accounts, instead of using a password or PIN.

Vein recognition technology is used by some banks in Japan and elsewhere at ATM machines, but Barclays said it is the first bank globally to use it for significant account transactions.

Barclays said it is the start of a ramp up in its use of biometrics to provide safer verification systems that cut fraud risks from customers sharing or choosing obvious passwords, or forgetting PINs.

"Biometrics is the way to go in the future. We have no doubt about that, we are committed to it," said Ashok Vaswani, chief executive of Barclays personal and corporate banking. He said Barclays was improving technology and security, but criminals were also getting more sophisticated.

"You can't let these guys create a breach in the dam. You've got to constantly stay ahead of the game," he told Reuters.

Britain's private companies lost 21 billion pounds ($34.5 billion) from fraud in 2012 and financial firms suffered 5.4 billion pounds of that, according to National Fraud Authority estimates.

Source: The Times of India

RBI to put in place early warning system to track bank health


The Reserve Bank of India revealed that it is putting in place an early warning system to track any deterioration in financial parameters of banks and take punitive actions if required.

The central bank is also proposing to set up a Central Fraud Registry as a searchable centralized database for use by banks, RBI said in bi-monthly monetary policy.

"An Early Warning System (EWS) is being put in place to track banks' critical financial parameters. Deviations from pre-defined benchmarks would trigger more granular oversight in the form of enhanced off-site monitoring, focused discussions, on-site examination and punitive action, if warranted," it said.

The move is aimed at taking timely action to ensure that financial institutions remain solvent.

RBI has also announced that it will come out with guidelines for monitoring tools for intra-day liquidity management by October end.

Source: Business Standard

Cyber Crime: A threat to E-banking adoption in Nigeria?


Cyber security experts have predicted an increase in cyber-crimes in 2014 in line with the growing usage of the internet.
The Central Bank of Nigeria’s report for the first half of 2013 indicated that there were 2,478 fraud and forgery cases involving Nigerian banks valued at over N20 billion. This represents an 8 percent increase over the previous year volume but a considerable increase in value of over 200 percent from 2012

Between year 2000 and 2013, Nigerian banks have lost an estimated N159 billion to electronic frauds and cyber crimes according to reports by the Nigerian Inter-bank Settlements Systems (NIBSS).

Taiwo Longe, Chief Information Security Officer, Central Bank of Nigeria (CBN), while speaking at the recent National Cyber Security Forum (NCSF 2014) was keen to highlight the growing rate of cyber crimes in the country. “With the growing threat of cyber criminals, the need for a policy framework to address the menace has become more imperative now than ever before,” he said.

Internet usage in Nigeria has grown exponentially, currently ranked 8th globally, and as a result; an increased amount of online activities in the country.

Studies conducted by KPMG on the banking sector indicated that for customers aged 30 and below, eight-in-ten customers never use internet banking. Perhaps the issue of reliance/security in terms of e – banking activities has been a major hitch.

According to the survey, “An overwhelming number of corporate customers (95 percent) rated security of their online corporate solution as their most important element of online banking.”

The burgeoning popularity and convenience of e- banking has further presented an enhanced opportunity for cyber-crimes in the country.

According to the KPMG survey on the Nigerian banking sector, "2 percent of retail customers indicated that they had experienced a fraud incident in the last year." Although 2 percent appears diminutive today, it may however, indicate the start of a potentially disturbing trend in the country.

As the Nigerian economy heads towards a cashless society, the adoption of e-banking is undoubtedly necessary. E-banking users are a potentially attractive customer segment for banks in the country. In a bid to tap into this potential market segment, banks must address the issue of cyber-attacks.

An emphasis should be laid on the deployment of fraud detection solutions which could help guard against fraud and also protect customers against e-channel frauds

Source: Business Day

Online Banking- A blessing or a threat in disguise?


E-banking, or online banking as we call it, has become an accepted norm of financial transactions for millions around the world. The pervasiveness of internet has contributed to this channel of banking gaining prominence not only in developed countries but also in the developing ones.  The modern banking customer who is short on time does not hesitate to log on to her online banking account and make payments online or transfer money, much to her relief.  Aren’t we lucky enough to experience such luxury at the hands of technology?

Well, pause for a second. The growing menace of fraud has posed a big threat to the safety of these banking transactions. Identity theft, phishing & smishing (phishing through mobile phones) are the most common fraud practices threatening the online banking space. According to a report published by Kaspersky in 2013, online fraud is costing the global economy many times more than initial estimates of USD 100bn a year, with bank fraud contributing the maximum. Also with the emergence of various social media channels, fraudsters have upped their ante. As per a research by Microsoft, phishing via social networks was used in 84% of the total attacks carried out in 2011. Such attacks not only expose gaps in the online banking ecosystem but also pose a grave challenge for banks- in how to establish a counter-attack mechanism.

Banks must incorporate a strong combat mechanism- that cannot be achieved by simply following an outside-in defense approach that is reactive in nature. What banks need is an inside-out approach to fraud prevention using customer behavioral intelligence. Customer behavioral intelligence not only makes use of financial transaction patterns but also non-financial transaction patterns, user login patterns and device usage patterns to come out with fraud-risk advice.  This includes using 2-factor authentication to restrict the fraudster from making unauthorized access into the customer’s online banking account, as mandated by Reserve Bank of India, recently.  This fraud-risk advice being available in real-time empowers the banking system to allow, decline or challenge suspicious transactions thereby preventing the internet banking fraud from actually taking place.

Thus, implementing strong online fraud prevention technology is essential not only for making internet banking transactions fraud-proof for customers but also enjoyable. A good fraud prevention solution can not only benefit the bank in terms of improved customer loyalty but also help the bank improve its bottom-line.

Source: CustomerXPs

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