March 2014 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.

Insider Fraud costs Barclays Bank £1m


Fraudsters stole more than £1m from a Barclays bank branch after fitting a remote control gadget to a worker's computer, a court has heard. The keyboard, video and mouse (KVM) device was attached to a computer at the Swiss Cottage premises with the help of "inside man" Duane Jean-Jacques, London's Southwark Crown Court was told.

On April 5 last year, 128 transfers using Jean-Jacques’ staff login were made totaling £1.25m, it is alleged. Some £700,000 of that money has yet to be recovered. The transactions, each for less than £10,000, took mere seconds, the court heard.

Six high-value accounts at the branch in north London were targeted.  Jean-Jacques was not present at the computer at the time, which the prosecution says was controlled from afar using an internet connection.

KVM devices are small devices that can be attached to computers. The KVM in this instance allegedly had a router attached with a data sim card that allowed remote access to the bank’s computers.

Jean-Jacques and Mullins-Abudu deny conspiring to steal from Barclays. They are on trial with three other men who are accused in relation to other fraud and theft-related offences.

Source: Sky News

Banks say cyber fraud a major economic crime in Kenya


Commercial banks said yesterday amount of money lost to cybercrimes could be one of the highest among the five major economic crimes despite its frequency being ranked bottom.

A recent report by Price Waterhouse Coopers said that cyber fraud was the least frequently reported in its survey at 22 per cent, trailing asset misappropriation(77 per cent), accounting(38 per cent), procurement (31 per cent)and, corruption and bribery(27 per cent). 

The PwC survey focused on all economic sectors but the financial services sector remains the most targeted.

Kenya Bankers Association, the 43-bank industry lobby, reassured banks would continue investing heavily in reinforcing their systems against cyber fraud.

Contested data have pointed to a possible loss of billions of shillings annually from estimated thousands of attempted attacks on individual and corporate accounts.

KBA chairman said that the lobby's human resources as well as bank fraud and security committees were developing an industry-wide code of ethics that, upon implementation, will blacklist and lock convicted fraudulent employees out of jobs within the industry.

Source: the Star

Highlights from Global Anti-Money Laundering Survey


KPMG recently released the results of its Anti-Money Laundering survey that was launched in November last year.  Over 310 respondents coming from AML-related professional backgrounds across the financial services industry participated in the survey.  Highlights from the research are as follows:-

Focus for Senior Management-   AML Issues is moving back up the agenda for senior management with 88 percent of respondents saying that AML is a priority for them

Cost of Compliance- Costs continue to rise at an average rate of 53% for banking institutions, exceeding previous predictions of over 40% in 2011

Taking a global approach- Only 32% of the 95% of respondents who have a global policy are able to maintain global consistency across subsidiaries and branches

Politically exposed persons (PEP)- PEPs remain an area of focus, gaining increased attention from senior management. 82% of respondents said that senior management is involved in the sign off process

Know Your Customer- KYC continues to be an area of concern, with 70% of respondents stating that they had been subject to a regulatory visit focusing on this area

Transaction Monitoring- Transaction monitoring systems continue to represent the greatestarea of AML spending, while satisfaction for these systems has declined with an average score of 3.42 out of 5 with regards to efficiency and effectiveness

Regulatory Approach- Regulatory approach was ranked as the top AML concern, with 84% of respondents stating the pace and impact of regulatory changes as significant challenges to their operations

Source: KPMG

Anti-Fraud and Anti-Money Laundering in Banking- The Common Denominators


The need for real-time fraud monitoring of banking transactions across enterprises is well established and banks are catching up to move from traditional methods to advanced real-time fraud monitoring systems. But many banks are still living with the old generation anti-money laundering systems which only can perform offline transaction monitoring by taking the transaction data from core systems offline or in batch mode.  Also, there is a lacuna with these systems from the perspective of agility and flexibility for changes required, with the changing times and the regulatory mandates.

Majority of the banks across the globe are not well-equipped with real-time suspicious transaction monitoring in their AML systems and this is one area banks need to gear up.

Here are the key aspects of alignment of anti-fraud and anti-money laundering efforts in a bank:-

Operational Processes and people:  Both anti-fraud and anti-money laundering departments of the bank need dedicated investigated teams who investigate each case/alert that systems generate based on the severity level and category of the alert as per the defined processes of the bank.  It makes sense for the banks to optimize the efforts of investigation teams by having combined AML and fraud investigation under single umbrella.

IT Platform: If the both fraud management and AML can be done using a single platform bank will have huge benefits in terms of the capital and operational expenditure leading to significant benefits total cost of ownership (TCO).

Data: Data Integration is one challenging area for banks. Both fraud management and AML systems need the integration with the same host systems (core banking system, credit cards etc. ) for the corresponding transactional data and master data.

With the need for sophisticated fraud detection capabilities and current state of out-dated AML system many banks have, combined Real-time Enterprise Fraud Management and AML platform is an idea whose time has come. Few banks have already begun their journey on this front and we expect more banks to join the bandwagon.

Source: CustomerXPs

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