Today, fraud rings are employing much more sophisticated tactics than in the past, with technology allowing them to hit multiple locations or financial institutions in quick succession – from halfway around the world and with little risk to them.
Because organized fraud rings are sharing technology, data and insights designed to defraud financial institutions, it’s critical that banks and credit unions collaborate to defend against this growing threat.
We as an industry have gotten close over the years, but there have always been missing pieces that have made it difficult to connect the dots and move forward with a full-force collaborative effort. But there’s good news: Today, three important elements have converged to enable the unprecedented level of industry collaboration that’s necessary to detect and shut down fraud rings and schemes:
Online fraud continues to increase: According to an analysis of ID Insight’s velocity databases, there are more than 11 times as many attempts in the online channel versus in-branch attempts, sometimes only minutes apart from one another. While this is troubling news, the increased need contributed to allow the industry to embrace true collaboration.
There is more data to analyze: The number of financial institutions reporting potentially fraudulent behaviors has finally reached critical mass. Fraud investigators are already critical to the ecosystem of fraud prevention and detection. By sharing and amplifying their expertise for an entire network, they’re creating a movement that is truly greater than the sum of its parts.
Technology is now up to the task: Insights around suspicious behavior can be automatically generated and distributed. Cooperating financial institutions improve the fraud catch rate, reduce fraud losses, reduce customer friction and improve the fraud investigators’ efficiency by pinpointing where they should focus their investigations.
For financial institutions, being a part of a nationwide collaborative network is like having their own investigation unit made up of thousands of expert investigators. In the course of keeping fraud out of their own banks and credit unions, investigators benefit from – and provide benefit to – their industry peers.
For example, say an investigator, through careful and thorough research, determined that an account-opening attempt was suspected fraud. By marking the account-opening attempt, key identity (non-FCRA) elements and associated communication end points associated with this suspicious application are tagged within the system. If there is another attempt, the suspicious address, phone number, or email address will trigger a message that essentially warns all investigators in the network.
“More information sharing across departments as well as across institutions is necessary to thwart fraud across the board,” says Tracy Kitten, director of fraud and cybersecurity at Javelin Strategy & Research. “Receiving information about emerging fraud schemes in real-time can only stand to benefit fraud and cyber teams.”
The federal government agrees. In December, Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco announced that Section 314(b) of the USA Patriot Act allows banks to share more financial crime data among themselves. FinCEN released an updated fact sheet, replacing previous guidance on voluntary information sharing.
A network codifies the investigative community’s due diligence to produce benefit for each individual institution as well as the industry at large. Peers and colleagues share the heavy lifting; the outcome is that the whole is greater than the sum of its parts.
Because of increased fraud, additional data and more capable technology, banks can access the most important innovation yet for enabling fraud investigators across the nation to join forces quickly and easily in the fight against new-account fraud and account takeover. Collaboration is the missing piece that will finally allow financial institutions to cut fraudsters off at the virtual knees.
Checks remain a primary means of fulfilling financial obligations. Technological advances coupled with increased availability at decreased costs have enabled criminals to engage in illegal and/or deceptive practices that include signature forgery, counterfeit checks, and physical alteration of paper checks....