Controlling Insider Fraud in Financial Institutions

Analysis of insider fraud in banks by both the American Bankers Association and Tower Group came to a similar conclusion:

65% to 70% of fraud dollar losses in banks are associated with fraud committed by employees – Insider Fraud

The Solution

Focus Technology Group’s solutions encompass a large array of analytics that measure risk and highlight anomalies associated with suspicious account and transaction activity. Hundreds of unusual events and conditions are searched out, scored, prioritized, and provided as insider fraud alerts and reports to analysts.

Much insider fraud is revealed through transaction activity and on specific account based events. Analyzing transactions for the possibility of being suspicious, e.g. out-of-pattern, unusual, or inappropriate for the nature of the account .

A few examples, all of which have detected fraud, serve to illustrate:

  • A loan account noted as having a change to its payment frequency from monthly to annual, and a change in its late notice grace period from 15 days to 99 days would be red flagged
  • A CD that within the past 30 days has had interest payments setup to be mailed and which has had a change to it alternate address would be scored high and would be red flagged if the customer has other deposit accounts classified as dormant
  • An unusual number of backdated loan principal payments and/or payment reversals would be red flagged as a possible indicator of a lapping scheme
  • Out of pattern backdating of check deposits on a single account would be red flagged as a possible insider generated kite
  • The absence of an acceptable number of CD accounts that should be put under dormant control could represent evidence that someone is withdrawing dormant funds

FTG is consistently adding new routines and analytics to stay on top of new fraud techniques and trends. For example, detection of identity theft by employees has been aided by a new BancAudit routine that detects unusual account inquiries and identifies account inquiries on accounts that have experienced check or deposit fraud. A newly released CIF maintenance monitoring tool helps detect identity theft and is also used to identify possible insider fraud by highlighting flip/flop address changes.

To provide financial institutions worldwide an integrated one stop source for controlling and managing fraud, anti-money laundering and operational risk. FTG provides financial institutions enterprise-wide and holistic analytical software products supported by services that minimize regulatory and financial risk, significantly reduce insider and external fraud losses and generate cost savings through operational efficiencies.