A guide to Financial Crime Management

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The Guide to Managing
Financial Crime in 2015
This booklet aims to equip bankers and fraud
management professionals around the globe
with pragmatic insights and knowledge to
effectively institute a fraud free organization.

Understanding Financial Crime
Financial crime is a serious criminal offense that involves the unlawful
obtainment of funds from a bank or other financial institution
Most prevalent types of Financial Crime Prevalent today are:-
 Account Takeover: Account takeover involves having a fraudster take
over another person's account
 Application Fraud: Application fraud takes place when a fraudster
uses stolen or fake documents to open an account in another
person's name.
 Skimming: The theft of payment card information is called skimming
2

Understanding Financial Crime
 Internal Fraud: Internal fraud is broadly defined as an employee's
misuse or misappropriation of an employer's resources or assets for
personal gain
 Money Laundering: Money laundering is the process of creating the
appearance that large amounts of money obtained from serious
crimes, such as drug trafficking or terrorist activity have originated
from a legitimate source
 Phishing: Phishing is the attempt to acquire sensitive information
such as usernames, passwords, and credit card details (and
sometimes, indirectly, money) by masquerading as a trustworthy
entity in an electronic communication

Implications of Financial Crime
 According to PwC, 49% of financial services firms
have experienced some kind of fraud in the past
year.
 Of all fraud committed in Britain, 50% is conducted
online, costing the country’s economy £70 billion a
year.
 Online fraud alone has cost the global economy
much more than initial estimates of 100 Billion USD.
 The United States and Mexico experienced the
highest rates of credit card fraud in 2012, with 37%
of cardholders in each country impacted by credit
card fraud in the past five years.

Fighting Financial Crime
 The need for real-time fraud monitoring of banking transactions across the
enterprise is well established and many 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. Fighting financial crime within a bank begins with the
alignment of anti-fraud & anti-money laundering efforts

Key aspects of alignment of anti-fraud and AML efforts:-
 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 Platform: If 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. If there is a
single platform, that can handle real-time integration with host
systems for getting the events from the host systems and use the
same both fraud management and AML purposes, this could be
hugely beneficial for the bank

Monitoring Financial Crime
 In order to detect fraudulent
activities, many banks use new-age
transaction-monitoring systems
which target and prevent fraud
though a different approach that is
“aware” across multiple accounts
and systems in order to identify
those that may appear normal, yet
suspicious. Therefore it is essential
to establish what needs to tracked
and monitored by a bank to ensure
that no cracks exist in the system.

Tips for Choosing a Fraud Mitigation Software
 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
 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
 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

 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
 Insider Fraud: Banks are bleeding through the sheer number of insider
frauds encountered though the size of each fraud is small. 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: 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.

Thank You

A guide to Financial Crime Management

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