Banking fraud alert: Unveiling the latest schemes

Fraud within the banking industry has grown into an increasingly pressing issue, marked by a noticeable surge in both the frequency and financial impact. The Global Banking Fraud Survey reveals that more than half of respondents reported a significant upswing in both the scale and occurrence of fraudulent cases

Another study has indicated that the banking sector experienced a higher number of fraud attacks in 2021 compared to the previous year. For banks with annual revenues exceeding $10 million, the average volume of fraud incidents increased from 1,977 to 2,320 per month.

In 2023, fraudulent unauthorized payments schemes have emerged as one of the key banking fraud concerns 

The impact of massive digital transactions

The surge in fraud attacks coincides with the increasing activity in digital transactions, such as mobile banking, digital wallets, and online loans. This surge has elevated the risk of personal data breaches, thereby exposing vulnerabilities in the banking industry.

These fraudulent schemes include:

1. Account trading. Accounts that are sold typically belong to individuals who either knowingly or unknowingly part with them. However, some accounts are fabricated using stolen personal data. Widespread breaches of population data have made it easier for criminals to exploit this information by creating fake IDs, opening bank accounts, and subsequently selling them.
2. Illegal selling. This scheme unfolds when a bank employee unethically offers credit card applications to their prospective customers and simultaneously submits similar applications for the same customers in other banks. This practice threatens the privacy and security of the customers’ data.
3. Online application fraud. Online application fraud can manifest in various ways, encompassing deceptive practices involving checking accounts, credit card applications, and first-party fraud. When prospective customers complete online registrations, it creates an opportunity for fraudsters to engage in malicious activities. For example, they might manipulate banking systems by importing a photo from their mobile phone gallery and subsequently altering it to fabricate a false identity. It’s essential to highlight that banking systems generally permit the use of photos captured directly by the mobile phone’s camera

Preventive measures 

To address these types of scams, banks can take the following steps:

1. Implement Know Your Customer (KYC) procedures. Thoroughly verify the profiles of prospective customers, especially during account opening, making identity confirmation a mandatory requirement.
2. Monitor account activity. Utilize analytics and algorithmic machines to monitor account activities, detect suspicious transactions, and identify questionable destination account addresses.
3. Customer education. Educate customers about the risks associated with online fraud and provide guidance on safeguarding themselves, including the creation of strong passwords, avoiding email phishing, and practicing secure ATM transactions.
4. Crucial employee background checks. Conducting comprehensive background checks on prospective employees is crucial. These checks encompass verifying educational qualifications, employment histories, criminal records, and various other verifications. In managing these checks, banks must ensure swift and secure processes in line with regulations such as the General Data Protection Regulation (GDPR). This is where the Prisma platform comes in to address the urgency.
5. Whistleblowing system. Every bank should provide a dedicated portal for the public to report fraudulent activities. Through the Canary Whistleblowing System, this reporting channel is fortified with the Canary Mute feature, allowing users to report anonymously. With the assurance of anonymity, it is expected that the public will feel more comfortable and secure when reporting their complaints.

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