Fraud Detection and Financial Crime Risk Management

Cybercriminals are using ever-evolving, sophisticated techniques to steal user identities, data and money. At the same time, customers are demanding ubiquitous access to their financial information and banking services. These two factors combine to create a complex threat landscape that requires strong technology, constant vigilance, and fraud detection to protect financial systems and information from hackers.

Recent analysis by the Association of Certified Fraud Examiners suggests that fraud costs the banking industry over $65 billion every year. In such a complex environment, it’s necessary to take a comprehensive, holistic approach to eliminating fraud, with a focus on managing the risk of financial crime.

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Trends Driving the Need for Better Financial Crime Risk Management

The following factors make it more important than ever for robust financial crime risk management to be in place.

  • Banks and other financial services are embracing digital transformation and moving to cloud-based technologies.
  • Open banking means there’s far more integration both within and between financial organizations and their technologies.
  • Banks need to identify, analyze, and respond to potential fraud in real-time.
  • Customers are increasingly moving towards mobile-based access and transactions.
  • Customers demand fast, easy access to financial services, across all of their devices and use cases.

Users are increasingly accessing their data from anywhere, using third parties that integrate with their financial services and logging in through a mixture of public and private networks to carry out their banking.

These areas combine to expand the potential attack surface for hackers and cybercriminals significantly. There are more points of entry, increased chances for social engineering, and an ever-expanding network of integrations to secure. This, in turn, contributes to more stringent regulations that banks and financial institutions must meet in order to do business.

Security and Convenience Are a Delicate Balancing Act

Strong security is essential to keeping banking and customer data safe, but it also runs the risk of alienating users. Criminals are working to outsmart the system, which means financial institutions need to implement more rigorous security policies and technologies. The risk here is that legitimate customers face consequences such as:

  • Additional security challenges due to unusual behavior
  • Blockage or flagging of legitimate transactions
  • Difficulties with new device registration or access

These issues can be a significant cause of inconvenience and customer dissatisfaction, so balancing security against user expectations is vital.

Dynamic Analysis Makes Fraud Detection and Risk Management More Powerful

Typically, financial crime management solutions look at specific financial transactions. Although this is a good starting point, the increasing complexity discussed above means that approach is no longer enough by itself. Instead, financial service organizations should be looking towards dynamic analysis that considers multiple factors when detecting fraud or authorizing transactions:

  • The type and identification characteristics of a device used to access financial services or make transactions
  • The pattern of behavior that a particular account has used previously
  • The location of a device that’s accessing financial services
  • Factors such as time of day, environment, and other areas
  • Authentication requirements like multi-factor or biometrics
  • Business rules implemented by banks and financial institutions

This type of dynamic analysis, supported by artificial intelligence and machine learning, can maximize threat detection while eliminating false positives.

How HID Global Can Help Manage Financial Crime Risk

HID Global offers a complete threat and fraud management solution with HID Risk Management Solution (RMS). The RMS platform uses three primary tools: a behavioral engine, an anomaly engine, and a threat detection engine to dynamically spot fraudulent login attempts and illegal transactions in real-time.

The behavioral engine learns what makes your users unique, including:

  • Interactions with form fields, buttons, and other page elements
  • Comparisons between navigation and application usage habits for users
  • Behavioral biometrics for mouse, keyboard, and swipe interactions

The anomaly engine identifies what’s “normal” for your user, including:

  • Anomalous transactions and login attempts
  • Irregularities in geolocation
  • Unusual device settings and capabilities
  • Typical transaction values

The threat detection engine identifies when your user is not who they say they are:

  • Analysis of devices and networks used to access financial information
  • Monitors for malware and application integrity
  • Recognizes unusual or artificial access patterns

The effectiveness of the HID Risk Management System comes, in part, from the detailed information it collects about applications, user action and behavior, and communication content. Through continuous analysis, powered by adaptive algorithms, the system can identify new threats even with relatively little data. Machine learning capabilities enable this level of sophisticated pattern recognition. With RMS’ full integration into HID Global’s ActivID® Authentication Platform, organizations can provide advanced multi-factor authentication to protect user IDs, transactions, devices, and accounts.

To learn more about the benefits of implementing a threat detection approach and the technical requirements to look for in an integrated layered authentication platform, read the white paper.

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Olivier Thirion de Briel is Global Solutions Marketing Director for the banking sector at HID Global, leading the banking strategy and marketing for IAM solutions. Prior to joining HID Global, he managed the cloud strong authentication offering at VASCO Data Security. He previously managed Oberthur Technology’s strong authentication product line and founded two mobile companies. He holds an MBA from INSEAD, as well as an MSc in computer and electronic science.