Financial Crime World

Banks Fall Short in Fraud Prevention, Survey Finds

Gaps in Risk Management Strategies Exposed

A recent survey conducted by PMG has revealed that many banks lack a comprehensive approach to fraud prevention. The study found significant gaps in their risk management strategies, highlighting the need for a more holistic approach.

Key Findings:

  • Around one-third of banks do not have a documented fraud operating model.
  • 42% of banks do not integrate software, staff, reporting, and governance between fraud and financial crime units.
  • More than half of banks surveyed do not record the total cost of fraud risk management for their institution annually.

Lack of Integration Leads to Inefficiencies

The survey also found that many banks fail to integrate different aspects of their fraud prevention efforts. This can lead to:

  • False positives in fraud detection systems
  • Inefficiencies in resource allocation and management

Importance of Transparency and Accountability

Recordings the total cost of fraud risk management is essential for measuring the effectiveness of prevention efforts and identifying areas for improvement.

Diversity in Fraud Reporting Lines and Accountability Responses

The survey found that banks have different approaches to reporting fraud risk, with some attributing it to the first line while others attribute it to the second line.

Need for a Holistic Approach

KPMG’s Fraud Navigator tool is designed to help banks assess their maturity in governance, people, processes, and technology. Andrew Akoto, Partner at KPMG in Ghana, emphasizes the importance of enhancing analytical capabilities within an open banking environment.

Investment in Technology

The survey found that 77% of respondents plan to invest in technologies such as:

  • Transaction monitoring with machine learning/AI/robotics
  • Fintech/RegTech development
  • Biometrics
  • Greater use of open source and social media data

Focus on Planning Outside of Technology

While technology is crucial, banks must also focus on planning outside of technology to achieve efficiency and optimum performance across governance, people, processes in support of bank technology.

Conclusion

The survey’s findings underscore the need for banks to prioritize fraud prevention and risk management to protect their customers and reputation. A holistic approach that includes governance, people, processes, and technology is essential for effective fraud prevention.