Can Your System Adapt to Changing Fraud Schemes?
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"Be infinitely flexible and constantly amazed" - Jason Kravitz
If bank fraud always followed predictable patterns, we would be a lot better at stopping it. Granted, many instances of fraud do follow predictable patterns that are relatively easy to detect and prevent. However, it is the fraud that is "below the radar" (aka not detected by the bank's fraud rules) that worries me and many of my former colleagues in banking the most. Fraudsters are highly flexible in their approach to committing fraud. They have to be. The biggest return for their efforts results when no one sees what they are doing until it is too late.
The Bank Fraud Forum is full of examples of fraud that took place over a number of years. To remain undetected for years shows that they fraudsters were flexible in their approach. Conversely, the fact that banks routinely failed to detect fraud schemes that take place over the course of many years suggests that their systems have inflexible rules and cannot adapt to today's complex fraud environment. My post detailing the "30 Year Fraud is a great example. If the bank had flexible rules in place they could have spent time proactively searching for both internal and external fraud and arguably uncovered this fraud much sooner.
Does your bank have a team of investigators assigned to proactive fraud detection? Specifically, instead of waiting for previously defined fraud rules to catch the usual suspects, do you have a small team in place that is flexible in their approach to fraud detection? Can they develop and test ad-hoc fraud rules that mine transactions below the bank's radar? Call them your "special ops†team, or "SWAT", or just "proactive fraud detection". The name does not matter, what does matter is that your bank has fraud detection approach and technology that can be just as flexible as the fraudsters.
I think you get the point - fraud rules must be flexible. Whether by design or directive, many banks "lock" their rules and seldom take the time to adjust them. Adjust them they do, but only when losses have resulted and senior executives ask pointed questions regarding how your department missed the fraud. Senior executives whether they say so or not, expect your department to be flexible. Try explaining why a fraud rule has not been recalibrated or tested in any way for years when fraud slips below that rule.
Fraud like water follows the path of least resistance. If your fraud system can't easily adapt to the changing nature of fraud schemes, it is likely that the fraud system used by one or more of your competitors can. Don't allow your bank to offer the least resistance to fraudsters. Over time, nothing good will result except more fraud and frustration. Be flexible, you may just be amazed.