The New Generation of Fraud Management Technology: A True Enterprise Wide Approach

Current Trends in Fraud & Financial Crime Laura Hutton – Director of Banking Solutions, SAS

Fraud is a global problem

Organisations are faced with tough challenges to focus on reducing losses AND ensure a smooth customer journey AND take effective, timely action.

“Cyber thieves have cost US companies and their banks more than $15 billion in the past five years, the FDIC found in a recent study.” Financial Times, 2012

“Tax evasion losses are estimated at $3.1 trillion for 145 countries in the world which represent 98% of the world GDP between them.” The Tax Justice Network

HSBC to pay $1.9bn in US money laundering penalties

Standard Chartered to pay $340m settlement over Iran investigation

RBS and HSBC among banks fined £2.6bn for forex rigging

BNP Paribas to pay $9bn to settle sanctions violations

VAT fraud costing Europe €€50bn a yearCarousel scam escalates out of control as governments are accused of denial

Global trade in phantom cargoes swindles banks of £500m

Today’s frauds are

• Increasingly sophisticated

• Higher velocity/faster

• Cross industry

• Multi channel

• Advanced technologies

• Social with pressures on staff

Current fraud systems are not

good at finding fraudsters

• Siloed by line of business - no sharing of data

• Act on event or customer

• Rules and predictive models alone have limitations

• Few proactive steps taken to combat cross channel fraud

• Evidence insufficient to act upon

• Investigation time consuming

Internal Fraud - Laura Hutton, SAS

Online Fraud – Patrick Risch, ACFE

Application Fraud – Zoltan Zsolt, OTP Bank

Creating an Optimal Fraud Solution

Internal Fraud

Safeguarding your reputation from internal risks

Why is insider fraud so hard to spot ?

75% of all major fraud cases involved insidersKPMG Australia 2012 survey

Statistics

75%

Today’s schemes areFinancial losses Reputational Damage

Motivation

Pressure

PressureThe motivation, e.g. debt problems, external pressures from crime groups

OpportunityThe means

RationalisationA cognitive process Justifies the crime

How to rob a bank

The perfect heist requires:

• Advanced safe cracking

• Mountain climbing

• Kung Fu

• Computer hacking

• CCTV hacking …

Or …

Get a job at the bank …

… or better still

Get to know someone who has a job at the bank

Insider fraud is the low risk, high

reward crime of choice for modern

organised criminals

How do you define internal ‘fraud’?

Favouring applications

from a friend

Stealing money from a dormant customer account

Searching the account

of a favourite

team

Giving themselves

credit to cover debts

Searching for

information of use to a competitor

How to detect fraudulent staff –a 3-step programme

Step 1

Train your staff to spot the signs of social engineering and Organised Crime recruitment.

Step 2

Recognise that none of your external fraud detection systems are likely to find an insider –they already have the keys to the safe!

Step 3

Adopt a holistic “defence in depth” approach to the problem.

Identify data sources that will enable you to distinguish staff behaviour.

Make better use of your data

Network

Entity

Event

Understand the risks

Theft from customers

Credit abuse

Breaches of policy

Money laundering

Data theft

Procurement fraud

Expenses & Payroll

Trading fraud

Hybrid analytics

Visual scenario configuration

Ad-hoc, in memory reporting and exploration

Concise and efficient investigation

Visualise – empower the business user

Fixing Fraud How to detect staff behaving badly

"Security and fraud risk exposure is increasing as organizations are

threatened at multiple points of vulnerability.

Companies are re-evaluating how they tackle security since a

fragmented approach is consistently leaving organizations at

greater risk of attack. A more holistic approach to security ensures

all layers of protection function together.“

Avivah Litan, VP Gartner

Protection across the enterprise

Protection across the enterprise

Application Fraud

A world of opportunity – or a perilous journey?

Online Fraud

Potential projected global fraud losses related to occupational fraud are more than $3.5 trillion USD.

ACFE 2012 Report to the Nations

“Cyberthieves have cost US companies and their banks more than $15 billion in the past five years, the FDIC found in a recent study.”

Financial Times, 2012

Estimated global financial crime IT spending will grow to $4.3 billion USD by 2013.

Chartis Research

Online Banking Fraud increases by 71% in the first 6 months 2014

UK Payments

A growing threat

Modus operandi are changing quickly

… or….

All within 30 min

Real-life example

Points of vulnerability for online fraud

Point of exit

• New beneficiaries

• Velocity of transactions

• Suspicious session activity

Create alerts!

Point of compromise

Score incoming transactions for:

• Anomalous behaviour

• Change of details

• Drain of funds from savings

account (me2me transfers)

Customer behaviour

Score customers over their lifetimes for:

• Possible mule accounts

• Victim propensity

• Appearance on a watch-list

• Unusual behaviour

OPEN BOX SOLUTION COVERING ALL AREAS

Real time meets offline

Back-end analytics

Transaction DataCustomer DataThird-Party DataSession Data

Advanced Analytics

Social Network Analytics

Data ingest, link and enhance

Rules

Anomaly detection

SAS Hybrid Approach

Event Stream Processing (ESP)

Online Transaction

SAS Fraud Framework (SFF)

Enterprise Case Management (ECM)

SAS Fraud ModelsSAS Fraud Rules

Protecting Your Customer Against FraudPatrick Risch, ACFE

Application FraudZoltan Zsolt, OTP Bank

The New Generation of Fraud Management Technology: A True Enterprise Wide Approach