How Financial Institutions Can Prevent FraudHow Financial Institutions Can Prevent Fraud

According to the Federal State Commission, the total consumer complaints last year reached an all-time high of 3.2 million, which is a three percent increase from 2018. This report asserted that Fraud was by far the largest source of consumer anger, carrying a total of 1.7 million complaints.

Even so, fraud is not something that customers alone have to worry about. Financial institutions are making massive losses each year as hackers and cyber criminals advance their technology and tactics.

Luckily, there are things financial institutions can do to prevent fraud. They include the following:

Watching for internal fraud

Varonis global data risk assessment found that in 2019, 53 percent of the assessed companies had more than 1,000 sensitive data files open to all their employees. In many cases, fraud in financial institutions is instigated by malicious insiders who have access to sensitive information. Besides safeguarding data, financial institutions should be very meticulous while hiring and conducting background checks to spot individuals with the potential of committing fraud against the institution. They should also put in place a checks-and-balances workflow to eliminate a potential threat before fraudulent transactions are conducted.

Employ the most advanced cyber security

It’s always helpful to identify a threat and eliminate it before it causes any damage, and one of the most effective ways of doing so is employing up to date cyber security. Financial institutions should seek professional services from leading cyber security agencies that offer services like threat intelligence and managed security. These agencies typically monitor internet sections where hackers lurk and deal important information, including the Deep Web and Darknet, and actively mitigate threats before they become a problem.

Identifying all individuals making transactions

The Federal Institutions Examination Council has been encouraging financial institutions to set up a layered security system. One critical layer of such a security system involves identifying every person as they make a transaction or access electronic banking services. They should employ means to authenticate customers in real time through automatic signature verification.

This is often done with different software options:

• Visual signature capture

• Electronic signature capture

• Automated signature verification for multiple documents

Educating their customers

Many financial institutions make losses due to consumer fraud, and it’s time they took the issue seriously and faced the fact that not everyone is tech-savvy. From the many cases we’ve seen, it’s clear that most of their customers are largely uanware of the most recent methods cybercriminals use. They should include a dedicated page or two on their website and mobile apps to inform their customers about cybercrime and fraud while recommending the best approaches of preventing fraud. In the process, they should also include relevant contact information and the right steps to take to report fraud. That’s important because it helps the financial institutions and law enforcement agencies to stay abreast of the tactics of cyber criminals and respond accordingly.

Staying on the top of their IT security

All financial institutions should be more concerned about their network security. From phishing and spoofing to infecting networks with malware, cyber criminals often use different methods to breach networks and harvest data, and many of them work. The financial institutions have to monitor external threats and ensure internal access is checked periodically. This means that the user access rights have to be reviewed periodically to make sure employees are only accessing their assigned network areas.

Making sure internal audit departments are independent

A timely internal audit testing should be done in all financial institutions and reported immediately to the board of directors. Such a review is important in fraud prevention. On top of that, however, the financial institutions should make it clear to internal auditors that as much as other employees may take part in the testing, they shouldn’t have responsibilities in the areas they’re testing. That’s important because it ensures the people being involved are independent.

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