Lessons Learned from Organized Crime Rings

Recruiting bank employees to participate in an identity theft scheme can be well worth the effort. Eleven banks in Minnesota, Arizona, and Texas, as well as 5,000 victims, learned just how damaging “flipping” bank employees can be. Over the course of five years, the ring defrauded the victims and generated more than $10 million in “revenue”.
 
Having interviewed members of organized crime syndicates, I’ve learned that they often refer to proceeds from fraud in terms with which most business people are familiar: “income”, “revenue”, and “profit”. Why does organized crime refer to income from fraud in business terms? Because it really is a business (albeit an illegal one). To succeed, organized crime leaders must hire and reward people, develop rigorous processes and employ the right technology to achieve their mission. And, they must continually adapt and overcome the efforts of the banks and local, state and federal law enforcement to shut them down.
 
We all know that organized crime rings only have to be successful some of the time to make their efforts worthwhile, whereas fraud prevention departments in financial institutions are expected to be right most of the time (or at least prevent fraud within an acceptable range). So what lessons can we learn from this fraud?

• Organized crime rings recruit bank employees to commit all kinds of fraud. No matter how strong a bank’s fraud prevention policies and procedures may be, employees can circumvent them with ease. Monitoring the accounts employees access and the transactions that they perform is not a luxury – it’s a must have. 
   
• All banks are susceptible to identity theft. Many of the banks targeted in this scheme invest tens of millions of dollars each year in fraud prevention and investigation, yet they are clearly not invincible. Banks of all sizes must employ robust countermeasures that are dynamic and incorporate the latest available fraud intelligence.
   
• Organized crime rings are not content with committing fraud within one channel or payment type. The scheme above involved account, loan, credit card and cash advance fraud. In addition to solutions that monitor across payment and service channels, banks should also seriously consider investing in a companywide fraud case management tool. Criminals have “one view” of fraud they commit against your bank, why shouldn’t your bank have the same unified view?
   
• Participation in bank fraud industry associations is well worth the effort. Building a trusted personal network of fraud professionals at other banks will help uncover common fraud schemes. As this case shows, federal law enforcement is much more likely to act if eleven banks are being victimized versus one or two.

I would love to hear from the readers. What are your lessons learned?

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