As we progress into Fraud Prevention Month, Ron Kaine, Central 1’s Head of Enterprise Fraud Management & Authentication, discusses how to design an effective fraud task force in this fast-paced digital landscape*.
In a fast-paced digital landscape where transactions occur in the blink of an eye, customers are increasingly demanding greater transparency and security. Securing real-time payments goes beyond simply deploying fraud prevention solutions faster. Every stage of the transaction-processing life cycle, including fraud detection, must be completed in fractions of a second.
This calls for a fraud task force tailored for real-time transactions. It requires solid governance, up-to-date processes and technologies and a well-functioning team. Whether you’re a big, mid-sized, or small financial institution, a holistic approach is essential to fortify your defenses against emerging fraud threats.
Whether opting for a fully in-house team, a hybrid model of internal and external resources, or a fully outsourced model, remember to prioritize investing in capabilities that align with the organization’s objectives and resources.
Establish a solid foundation for fraud governance
Define organizational roles and responsibilities related to fraud risk and gain leadership commitment.
Establish fraud risk management policies, including risk tolerance, proactive and reactive measures, dispute and liability approaches, and ensure they’re updated regularly.
Sustain the continual effectiveness of fraud governance through consistent training efforts focused on fraud prevention and detection across the organization.
Establish a reporting mechanism to ensure accurate and timely identification of potential fraud occurrences and trends.
Leverage technology and monitoring
Technology is a crucial ally in the fight against fraud, especially with the prevalence of real-time payments. At the heart of this evolution are machine learning models. These models not only enhance fraud detection, but they also evolve with changing patterns to indicate fraud behaviour. Innovations like generative AI (e.g. ChatGPT) are important to pay attention to as fraudsters are using it to create better-targeted and increasingly compelling scams.
While technology plays a crucial role, human analytics and monitoring remain indispensable as part of the holistic approach. Daily, weekly, monthly and quarterly monitorings serve as the eyes and ears of fraud prevention efforts, enabling proactive interventions and the identification of anomalous activities, staying one step ahead of fraudsters. Fraud management needs to be active, and not reactive.
Build your organizational readiness
As a strong financial institution, the governance alignment, policy implementation and technology solution deployment work together to bring strength to payment functionalities and fraud protection measures. As a next step, when financial institutions assemble a fraud “dream team,” make sure to consider a few different factors: the organization’s risk tolerance levels; A balance between member experience and security; The level of investment you’re willing to commit.
While having a full internal team is one approach, financial institutions can also consider alternate ways to design their fraud prevention approach to maximize expertise and value. They can choose between building an in-house team, outsourcing to external providers, or adopting a hybrid model that combines both approaches.
Key roles forming a strong fraud team include the following:
Fraud leader: This person serves as a key liaison to senior executives, possessing a robust policy background and a deep understanding of performance metrics. Deeply passionate about fraud prevention, a Fraud leader plays a pivotal role in setting the organizational tone and driving initiatives to combat fraudulent activities effectively.
Fraud analyst: A skilled professional adept at identifying and analyzing patterns indicative of fraudulent behavior within financial transactions or operational processes. This is a role an organization may consider using an external provider.
Fraud data analyst: An individual with a background in fraud detection, often with statistical or analytics skills, coding skills, and potentially more advanced modeling skills. This is a prime role to use an external partner and use on demand.
Fraud investigator: Often considered as Fraud Analysts with an advanced skill set, these professionals delve deeper into fraud detection and investigation. While they handle tasks similar to Fraud Analysts, such as reviewing alerts, their focus extends to uncovering sophisticated fraud rings and connections between different fraud activities.
Subject matter expert: The SME serves as a primary resource for conducting training sessions targeted at staff and members, facilitating outreach initiatives, and spearheading awareness campaigns to promote a culture of fraud prevention.
*This content was first published by Enterprise Security Magazine.
