Optimize Your Fraud Prevention Using a Layered Strategy

Did you know that data from the Federal Trade Commission shows consumers reported losing nearly $9 billion to fraud in 2022, up 30% over the previous year?

If your accountholders ask any search engine how to combat fraud, the response will likely include a list of tasks that can range from changing passwords frequently to tightening firewall configurations, and from using fraud monitoring software to freezing your credit report.

For your financial institution, however, combatting fraud is not that simple.

Adopt a Multi-Layered Fraud Prevention Strategy

In 2024, the name of the fraud prevention game is layers.

To fight back against fraud effectively, you need to adopt a robust, multi-layered defense strategy ‒ one that provides layers of protection for your financial institution, staff, and accountholders, and also includes layers of transaction monitoring and solutions that provide you with meaningful and impactful alerts (and won't waste your time with a multitude of false positive events).

While some solutions are collaborative, bringing activity from various sources into one place for review, you may still need to review additional resources given the variety of fraudulent activities occurring over several communication and transaction channels.

When I speak with clients, I ask, "What kind of fraud are you experiencing the most?" Often the reply is "check fraud." Yet within the check fraud channel alone, this could encompass several things: transit checks drawn on another financial institution being negotiated at your teller line, ATM, or mobile deposit; or checks drawn on your own financial institution that have been washed, duplicated, or written against a closed or dormant account or the account of someone who is deceased. These are just some of the examples within the "check fraud" category.

Consider an online banking transaction. You may utilize one or more authentication methods hoping to keep the bad actors out of your customers' or members' accounts. But what if the fraudster has the right credentials and makes it through the authentication layer? You'd want to have someone watching the transactions generated, as well, using information like behavioral analytics coupled with IP address, machine ID, and geolocation to identify something that looks suspicious ‒ and catch the money before it goes out the door.

It would be an interesting exercise to break down each transaction channel you offer to your accountholders and identify the types of fraudulent activity that could occur through each of them. While we strive to build systems that monitor as many types of fraud as possible, a layered approach is still required. Each system is going to use its own rule sets and algorithms. Where one may pass a transaction through, another may catch something suspicious. For as many fraudulent transaction types as you can list, just as many approaches to monitoring these transactions exist, as well.

The bad actors are waiting for you to close your eyes to one of these channels. They're initiating transactions through multiple avenues in the hope that one will result in a payday. Monitoring multi-channel activity in one place helps broaden awareness and distinguish fraudulent activity when things are coming at you from all directions.

Are You Getting the Best Results From Your Fraud Detection Tools and Solutions?

A few industry solutions that help you approach fraud reviews from different perspectives are listed below.

How many of these solutions do you employ? Is there some type of transaction that may be getting through, causing you time, effort, and money to retrieve funds after the fact?

• Know your customer and understand their intent.
  • Fraud monitoring software - Uses behavioral analytics, artificial intelligence, and rule sets to identify transactions that are out of the norm for each individual accountholder's typical activity, and reviews for activity on dormant accounts, out-of-range check numbers, multi-channel transactions, and more.
  • User authentication - Utilizes multi-factor authentication, device verification, identification of how users hold their phone, time-of-day access, and other behavioral analytics before allowing access to account data.
  • Positive Pay - Compares incoming transactions to a defined list of checks and ACH items your commercial accountholders have initiated or authorized.
• Identify precursors.
  • Country restrictions, controls over tap to pay, EMV, and mag stripe information.
  • Negative databases to compare transit checks for duplicate check presentment, accounts with known fraudulent activity, and closed accounts.
• Leverage real-time response.
  • Stop transactions in real time - before they leave your institution.
  • Build a consortium of data surrounding known fraud vectors and fraudulent recipient profiles.
• Provide training.
  • Last, but certainly not least: let's not forget training for your employees and your accountholders.

Social engineering continues to be one of the primary methods for scamming information, data, and money, and the use of artificial intelligence on the dark web has made the scammer's job even easier and the consumer's ability to recognize fraudulent emails, texts, and phone calls that much more difficult.

Therefore, training is one of the most effective fraud detection and prevention tools you have at your disposal!

Close the Gaps In Your Fraud Monitoring Programs

If there's a gap in your fraud monitoring programs, reach out to your account executive to talk it through. We're happy to discuss the best layers and solutions to help bridge that gap.

Need help combatting fraudsters in the real-time digital world? Learn more.

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