Financial Crime World

Fraud Detection Methods in Banking: A Growing Concern in New Zealand

As technology continues to disrupt the financial sector, banks and financial institutions in New Zealand are facing an unprecedented surge in cyber and fraud risks. According to the National Cyber Security Centre’s 2022-2023 Cyber Threat Report, there were record-high levels of financially-motivated cyber activity in 2022-2023, with cybercriminals adopting new techniques and technologies to evade detection.

The Growing Concern

One of the biggest concerns is the use of generative AI to produce derivative malware that can evade detection software. Additionally, AI-powered phishing attacks are becoming increasingly sophisticated, making it essential for banks to stay ahead of the curve.

Investment Scams on the Rise

In New Zealand, investment scams have emerged as a leading instance of financial crime, with vulnerable victims often falling prey to promises of high returns. These schemes are becoming more complex and harder to spot, leaving Kiwis on high alert for suspicious activity.

Cryptocurrencies Pose a Significant Risk

Cryptocurrencies also pose a significant risk, as their anonymity can be exploited by fraudsters and money launderers. The Reserve Bank of New Zealand has expressed concerns about the challenges posed by some crypto assets in managing money laundering and preventing cyber risks.

Cascading Risks

The cascading risk from cybercrime can have far-reaching consequences, including financial damage, business interruptions, reputational damage, and data breaches. Sensitive information related to environmental, social, and governance (ESG) issues is particularly vulnerable to fraud and data breaches, which can lead to significant reputational harm.

Mitigating Risks

To mitigate these risks, business leaders must take proactive steps:

  • Be Prepared: Have an incident response plan in place.
  • Stay Vigilant: Stay on top of AI-powered tools within your organisation and ensure robust privacy and security measures are implemented.
  • Make Fraud Prevention a Priority: Educate employees and place it on the radar of senior management, including the Board and audit committee.
  • Leverage Technology: Detect and investigate anomalies using firewalls, access controls, and encryption.
  • Conduct Regular Reviews: Identify opportunities for improvement through internal control reviews.
  • Seek Expert Advice: Consider seeking external advice from experts in fraud prevention and detection.

Conclusion

By taking these steps, banks and financial institutions can stay ahead of the evolving threat landscape and protect their customers’ sensitive information. It is essential to prioritize fraud detection methods in banking to ensure a secure and trustworthy financial environment for all New Zealanders.