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 brings to light the effect of banking fraud creeping in and making banks lose millions to this plauging menace.
There is no relief for bank consumers as cases of ATM card fraud in Kenya seem to be rising at an alarming rate. Kenya Commercial Bank sent out messages in mid-January to some of its customers asking them to hand in their cards, an indication the bank could be the latest victim of fast emerging ATM card fraud schemes.
“ATM skimming is a relatively new phenomenon in Kenya. It is an industry wide matter and it is a little over one year since these cases came to the fore,” the bank added. Annual losses through fraud in the region are estimated to be around $48.3 Million (about Sh4.05 billion) according to the latest statistics by audit firm Deloitte. Banks say they have been upgrading their systems with more sophisticated skimming detection devises and upgrading their cards.
Most of them are moving away from the magnetic strip cards and taking up the chip and pin technology to enhance secure transactions. Most banks and payment services providers, however still hold consumers responsible for safeguarding accounts information.
ATM fraud intelligence shows fraudsters use the skimming method to trap information from unsuspecting ATM like through cleverly positioned wireless camera which captures card details entered during transaction and then transmits them to a remote device. The criminals then copy the trapped data and use it to withdraw cash from customer accounts through the ATM. The risks of card fraud are also higher now as more Kenyans are adopting the use of plastic money instead of cash.
Source: the Star
A former Seattle resident who committed nearly $600,000 in bank fraud was sentenced to six years in prison, five years of supervised release and -$592,580 in restitution. Chi Ahn Nguyen used the identities of others—many of whom participated in the scheme—to access credit cards that he and others involved in the scheme used to purchase jewelry and other consumer goods or for cash advances at casinos. Nguyen then took a share of the proceeds derived from those transactions.
According to records filed in the case, Nguyen gained access to credit cards from Bank of America, Wells Fargo, Discover, Boeing Employees Credit Union (BECU), Chase, U.S. Bank and Capital One. In April 2011 alone, Nguyen took cash advances in excess of $16,000 at area casinos. After exhausting the available credit, Nguyen would then make fraudulent telephone and Internet payments on the accounts so that credit would be restored and additional purchases or cash withdrawals could be made. Nguyen made these fraudulent payments using account information that was false or bank accounts that had insufficient funds to cover the payments. But by the time the banks discovered the payments were fictitious, Nguyen and his co-schemers had already used the fraudulently obtained credit. Between February 2011 and December 2011, Nguyen was responsible for losses totaling $588,367. As part of his plea, Nguyen also pled guilty to a separate bank fraud scheme that he perpetrated in early 2012 in and around Chicago. Nguyen was ultimately arrested on these charges in Hartford, Connecticut.
Public sector banks in India have cumulatively lost a massive sum of Rs. 22,743 crore due to cheating and forgery in the last three years alone, according to a report by Hindustan Times.
Indian Overseas Bank is the worst hit with a loss of Rs. 3,200 cores as against State Bank of India (SBI) which lost Rs. 2,712 crore. Between April 2010 and September 2013, the number of bank fraud cases has shown a slight decrease yearly but the amount of money lost has been increasing year on year.
The number of fraud cases, for instance, came down to 2996 in April 2012 to March 13, from 3748 in April 2010 to March 2011, but the amount shot up to Rs. 10179.42 crore from Rs. 3275 crore.
“We have already taken corrective measures to ensure preventive vigilance. Policy tightening is also being undertaken,” said M Narendra, Chairman and Managing Director, Indian Overseas Bank. He also added that adequate training is being provided to the staff and the bank is ‘fine-tuning operations aspects’. A senior official at SBI said the amount is a cumulative one. “In the last one year several stringent measures of checks and balances have been put in place and in the last one year the number of cases has substantially come down,” the official, who did not wish to be identified, said.
Source: Hindustan Times
Non-financial transaction patterns: Ability to correlate at non-financial transaction patterns with financial transaction patterns in fraud detection is one of the key aspects. Some of the modern core banking systems do not even log/audit the non-financial transactions like balance enquiries and signature views in the core banking database. These are vital early warning signals for early detection of fraud attempts. It’s important that the fraud detection system is capable of handling non-financial transactions in addition to financial transactions
Really Real-time with minimal impact on the core processing systems performance. Though most of the current generation fraud detection systems work in near real-time for processing transactions, banks are looking for real-time fraud detection systems which can process banking events from core banking systems within seconds even milliseconds.
Cross-Channel Intelligence: Ability to correlate the intelligence gathered from on source system with the events happening on other channel system (cross channel fraud detection) is a key consideration – Traditionally some of the banks have adopted silo based systems that have the ability to monitor and detect fraud a single channel/product e.g. credit card fraud detection, internet banking fraud detection etc.
Insider Fraud : Banks are bleeding through the sheer number of insider frauds encountered though the size of each fraud is small. Insiders are also usually involved in larger fraud attempts by collusion with outsiders. Effective fraud detection should be able to monitor employee activities across multiple systems (core banking, CRM, HRMS etc.) they access and derive patterns of suspicious activities.
Fraud in direct channel banking transactions ( online, mobile, ATM, POS, internet payments) : With the increasing sophistication of fraudsters banks are playing a catch up game to secure the direct channel banking transactions with better fraud prevention capabilities. This includes efforts to prevent account take over, man-in-the middle attacks, CNP fraud, data breaches, skimming etc.
Intuitive Investigation workbench: Agility of the case management to suit specific workflows between business, compliance and fraud investigation is seen as a consideration. Wide array of investigation tools like account/alert profiles, visual link analysis and reports is also vital for improvements in investigator productivity.
Strength of the Scenario Library/ fraud detection models: Many banks do not have the in house availability of expertise in defining fraud patterns and they expect solutions to come with out of the box patterns and models for fraud patterns. Another key consideration is the ability to add and publish new fraud patterns in fraud detection engine without any code changes.
Time to market (Ease of deployment, integration, flexibility of changes, modern architecture) : Few banks have burnt their fingers with long drawn out project for enterprise wide fraud management implementation with established vendor solutions. Banks are looking for solutions which are easy to deploy and integrate with the existing systems albeit in shorter implementation cycles.
Alignment of Anti-fraud initiatives with anti-money laundering efforts: As both anti-fraud and anti-money laundering units ultimately roll up to operational risk management, banks are looking for synergies and cost optimization by having unified solution/platform which can deliver both fraud detection and anti-money laundering solutions.
The need for a single technology platform for enterprise wide fraud detection: Single platform that can monitor and detect fraud across all the different core systems used by the bank is seen not only a need but as a major challenge by the anti-fraud executives. The platform should monitor transactions and detect fraud in core banking, online banking, mobile banking, debit cards, loans, and credit cards.
Archive Section[-]  2018