Money laundering, automated clearing house fraud and wire transfer scams are running rampant in the banking industry.
U.S. financial institutions spent more than $4.5 billion on fraud detection systems in 2021 as continuous threats around real-time payments emerged in the space, according to an analysis from fintech Fiserv.
Executives from Nebraska-based First National Bank of Omaha and Sterling National Bank of New York joined a panel moderated by Andrew Davies, director of business development and financial risk management solutions at Fiserv, this week during Consumer Bankers Association’s CBA Live 2022 to discuss four ways to effectively manage fraud risk.
1. Investigate data lineage
Financiers can investigate the origin, changes and lifecycle of data to confidently make loan decisions, Davies said. The earlier you find the origin of the data, the earlier you can detect potential fraud, he said.
First National Bank of Omaha, for example, determines the earliest data point it has access to — whether it’s when the consumer logs in or when they schedule a payment, said Dave Richardson, senior manager at the bank. There are multiple points that could mark the origin of data and lenders need to “be able to pick up the earliest point, so you have all the data available so you can make a decision,” he said.
2. Determine data veracity
Financial institutions must also ensure that their data is accurate. Sterling National Bank, for one, relies on solid customer transactions just as much as those that are flagged to test for accuracy, Chief Information Officer Jason Vasquez said.
“I have far more good behavior than bad behavior, and a lot more data showing me what’s good rather than bad,” he said. “If I could use that good data to predict a good customer or a good transaction, you actually get to make the customer experience so much better.”
3. Maintain data integrity
Lenders should analyze the accuracy and consistency of data over its entire lifecycle as it passes through the detection system to maintain data integrity. That’s where lineage and veracity come into play, Davies said.
4. Confirm data currency
The passing of digital data is constant and financiers must understand who they are doing business with, Davies said. Confirming who has control of the data ensures the lender has access to the most current data set. “We’ve seen that manifesting most recently with sanctions,” he added.
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