Financial Services Has a Growing Problem: Internal Fraud
By Mike Betron, Infoglide Software Director of Marketing
The Aite Group recently authored a report entitled “Internal Fraud: The Devil Within.” After surveying 35 fraud and product executives at financial institutions across the U.S. and Canada, they concluded that internal fraud is a severe and growing problem that often goes undetected and almost always flies under the radar of public scrutiny.
On the customer relationship side of the business, many financial institutions have increased what they know about external actors by making their systems smarter, e.g. enhancing existing software with identity resolution:
“By incorporating identity resolution technology, they enhance existing historical data systems with information drawn from a wide variety of dynamic data sources (e.g., social media). Providing a real-time ‘360 view’ of an individual and his/her associations is improving daily business decisions at many leading companies.”
However, most have not yet incorporated the same technology to catch fraud. This survey suggests that insider collusion and individual fraudulent acts are on the upswing, representing a significant and growing percentage of monetary fraud losses. Furthermore, the report suggests that fraud problems are often swept under the rug:
“Most financial services firms are not keen to discuss the issue; institutions that build their brands on trust and reliability do not want it widely known that insider fraud is a problem. As a result, 35% of survey respondents reported prosecuting 10% or less of their confirmed internal fraud cases.”
Effective solutions (e.g., Infoglide’s Anti-Fraud Solution Suite) are proven and available. By not actively identifying internal fraud problems and pursuing effective solutions, financial services firms open themselves up to huge financial and public relations risk. Equally important, they enable competitors who move proactively to gain competitive advantage.
As report co-author Julie Conroy McNelley says, “Financial services firms must examine their current internal fraud prevention environment and determine how to bolster it. As competitors develop more robust defenses, fraudsters will migrate to the path of least resistance.”