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FOS Blog

14 Mar

Dial “F” for Fraud

Dial “F” for Fraud

According to the Association of Certified Fraud Examiners’ (ACFE), the average occupational fraud scheme goes on for 18 months before being detected.  Insider fraud can cause financial losses, higher insurance costs, and damage the Banks’s reputation, which could mean even greater financial losses.  Lack of proper supervision and lack of effective internal controls makes an institution especially vulnerable to insider fraud.  Although it is not possible to detect all instances of apparent insider fraud, potential problems can often be uncovered when certain warning signs are evident, such as behavioral and transactional indicators.  To help increase the efficiency and effectiveness of monitoring efforts, a technology solution can automate many of the time and labor intensive processes associated with manual fraud detection.  By capturing and recording data across a network, an automated approach can alert an institution to threats and create an audit trail of flagged activity to streamline investigation and loss mitigation.

The most effective internal fraud technology solutions include customizable business rules, which can be preset to automatically stop transactions or flag them for further investigation.  For instance, rules can be set regarding expected employee behavior based on their job responsibilities.  When insiders are operating in a matter that is inconsistent with their behavioral profile, the technology solution will automatically alert the institution which helps pinpoint activity, such as redundant account changes.  Furthermore, if an employee is accessing inappropriate information for their job function, a technology solution can help link that activity to new deposit or loan activity that has been initiated by that individual.

Internal fraud schemes are becoming more complex.  Implementing a technology solution as part of an enterprise-wide fraud management and prevention program can help an institution mitigate its fraud risks.  With the ability to closely watch and guard the areas of the Bank that are likely to be targeted, pick up on warning signs, and strengthen its internal controls, an institution can not only combat immediate threats, but also keep future internal fraud at bay.  Don’t be an outsider when it comes to insider fraud.