Financial Crime World

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Fraud Risks and Prevention in Banking

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Banks face significant fraud risks that can be challenging to mitigate. In this article, we summarize key points from a document highlighting the importance of preventing fraud in banking.

Fraud Risks and Prevention

A recent study revealed the following insights on fraud risks and prevention:

  • 68% of banks attribute fraud risk to the first line, while 32% attribute it to the second line.
  • A diversity in fraud systems is reported, with most using proprietary builds.
  • 51% of respondents experience significant false positives from their fraud prevention & detection technology.

KPMG’s Fraud Navigator

KPMG has developed a fraud navigator tool to assess the maturity of bank operating models across governance, people, processes, and technology. The tool consists of 10 components:

Components

  • Strategy & Governance
  • People & Organisation
  • Data
  • Technology & Analytics
  • Process & Controls
  • etc.

Insider Threats

Insider threats can be as great, if not greater than external fraud, as they have access to systems and customer data. Banks must enhance their ability to analyze data within an open banking environment and navigate through APIs.

Investment in Technologies

77% of respondents plan to invest in the following technologies over the next three years:

Technologies

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

Conclusion

Fraudsters are becoming more sophisticated and agile in their approach to diversify their efforts. Technology alone is not enough to prevent fraud; banks must also plan outside of technology to obtain efficiency and optimum performance.

About the Author

This article was written by Andrew Akoto, Partner, Risk Consulting at KPMG in Ghana. Contact information: