Industries
Solution
Cyber Security
Data and Cybersecurity to Fight off Cyberattacks
Highlights
- The growing complexity of fraud and scams is driving financial services organisations to bolster their defenses.
- To disrupt financial crime efforts and enhance awareness, governments and private sectors are collaborating, sharing data and intelligence.
- Adopting a multi layered, enterprise-wide approach is the key to protection.
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A growing challenge
The global fraud and scam economy is estimated to cost US$1.4 trillion worldwide.
Not a day goes by without another fraud or scam being reported by the Australian media. These incidents can be major or minor in terms of scale, complexity, and impact, and they affect consumers, financial institutions, governments, and regulators worldwide.
In this blog, Clare Bannon, Financial Crime Specialist, Tata Consultancy Services – Australia & New Zealand, explores the most effective scam and fraud management best practices banks and other financial institutions need to have in place.
Regulatory response
Organisations are reflecting on what can be done to help global consumers and financial institutions tackle the evolving problem.
To counter the increase and sophistication of fraud and scams, governments globally are focusing on a whole ecosystem approach to detection and prevention. Governments and private sectors are collaborating, sharing data and intelligence, disrupting financial crime efforts, and enhancing public awareness and education.
In Europe, we have seen the EU Commission update payment rules (PSD2) to protect consumers from fraud and scams. The United Kingdom released the National Anti-Fraud Strategy for greater consumer protection, designed a contingent reimbursement model to reimburse scam victims, and delivered the Online Safety Act 2023 to prevent fraudulent advertisements and promote safe internet activity. Meanwhile, the United States introduced a new web debit account validation rule to prevent Automated Clearing House payment scams.
Australia has established a National Anti-Scam Centre that coordinates government, law enforcement and private sector to information share and provides education and awareness to the public to combat scams. Some parts of the financial sector introduced initiatives such as payment delays, name, and account matching, blocking high-risk crypto platforms and real-time scam account data sharing.
Financial institutions’ response
As the regulatory focus sharpens around the problem, financial institutions in Australia have been doing their own analysis.
The firm are assessing their financial crime compliance operations to understand if they have effective fraud and scam management frameworks in place. Shared challenges across organisations are:
- The ability to detect the presence of gaps and inconsistencies and stop fraudulent payments.
- Immature approaches to governance and fraud and scam strategy
- Liability and compensation to victims are determined through inconsistent and narrow approaches
The first step an organisation should take is to determine if they have a Fraud Risk Management framework in place that prevents, detects, and responds to fraud and scams. To protect their customers and organisations, financial institutions must establish, monitor, continuously improve and innovate their Fraud Risk Management framework.
Within the Fraud Risk Management framework sits a dedicated fraud and scam management framework. For this framework to be effective it requires financial institutions to articulate their fraud and scam prevention and detection strategy. Organisation should have a strategy and governance accountability framework, as well as a scam response and customer compensation model in place. These would be subject to board oversight and independent review.
Next, they need to assess their existing People, Process, Data and Technology capabilities to determine deficiencies and required changes. The organisation must have key performance indicators (KPIs) specifically targeted to fraud and scam management such as a KPI on customer satisfaction, and a KPI on detection and prevention rates. Management review and reporting should be in place to ensure effective fraud monitoring and analysis is taking place. When assessing operational capabilities, organisations should conduct a risk and control assessment and evaluate its detection capabilities and security measures.
They also need to establish an internal fraud and scam education program for their employees, and an external awareness campaign directed at customers. Customer support is crucial, and fraud and scam response and timeline management KPIs should be put in place.
Innovation and proactivity significantly help to minimise the negative impact of fraud and scams.
The way forward
Organisations must bolster their defenses against the evolving threats.
Businesses recognise the importance of adopting a multi layered, whole of business approach to protecting themselves. Implementation of machine learning models, biometrics, and sophisticated tools and strategies can help financial institutions better detect and prevent fraud and scams across channels.
