The Four Essentials of Fraud Detection

For financial institutions, fraud identification and prevention is always at the top of their lists. While many banks rely on after-the-fact manual reports and threshold rules, these aren’t proactive ways to mitigate loss as a result of fraud. Therefore, these four essentials are musts for fraud detection in a financial institution. In addition, equip your facility with a comprehensive Bank Crime Insurance Program to protect your entire operation.

#1: Fraud detection in real time.

Anything less is a window for the criminals to get away.  Even for batch processes, the scoring engine should evaluate the transaction, and an authorization or decline decision should take place prior to funds movement, explains FICO.

#2: Analytics.

This is the only way to detect behavior patterns – and, more importantly, fraudulent behavior patterns – accurately. Understanding your customers and their transaction habits are critical in identifying fraudulent patterns and protecting their money. For example, small business owners are more likely to pay bills and utilize online banking at odd hours of the night and high-income individuals are more likely to spend money in exotic locations. Getting to know your customers can help to identify fraudulent spending and pinpoint red flags that stand out from their traditional spending habits.

#3: Workflow.

This is critical in solving challenges related to fraud resources. Specific actions, data, and processes are required to manage each type of fraud case and to use as evidence for prosecution.   Depending on the type of payment defrauded, there are specific steps required to make the customer whole, and every step to back out the transaction creates operational costs.  A cohesive and flexible workflow engine allows analysts to consolidate and, in many cases, automate the remediation process, states the article.

#4: Efficient rules engine.

This links analytic scoring to a solution for the type of fraud detected. Follow these specific rules and processes to ensure fraud is managed quickly and efficiently.


About FGIB

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for financial entities, in addition to providing crime insurance and general business insurance products to a number of firms across the United States. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (877) 485-4413 to speak with one of our professionals.