Banking Fraud Rules
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This presentation describes various financial crimes functional challenges and how to define and construct effective rules in support of Anti-Money Laundering (AML) or Electronic Fraud scenarios. It is useful to those working in traditional or digital Banking sectors; especially working in departments such as Internal control, Compliance, Monitoring or Investigation. Professionals in compliance or technology functions such as internal Control officers, compliance officer, rules developers, compliance supervisors and team leaders will also benefit as it aims to provide insight into effective rules that ensures their Banking operations remain compliant in line with ever-evolving electronic fraud and AML patterns. Later sections of the presentation also describe Dixtior Compliance Solution as an effective solution to detect and combat money laundering in any banking institution. To download the document, visit www.thetriversa.com/article.php
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Banking Fraud Rules
- 2. Rui Vicente CEO and founding partner of Dixtior Jide Sowade MD at TriVersa Solutions • •
- 3. In July 1991, as a result of Fraud, BCCI was closed with devastating consequences including: Source: https://fas.org/irp/congress/1992_rpt/bcci/05foreign.htm It is real and started much earlier… 1m Depositors losses A >$200m Central Banks losses B >$332m govt. entities deposit losses C >$1b Loans to govt. /govt. banks D September 30, 1988 PWC reportBCCI-Miami by central banks & gov. orgs March 31, 1991 consolidated loan reporthttps://fas.org/irp/congress/1992_rpt /bcci/ COLLUSION FRAUD IN BANKING: A LOOK BACKWARDS
- 4. Fraud in Banking Statistics Financial crimes functional capabilities Managing evolving fraud scenarios & rules Challenges achieving compliance Doing it right: The Dixtior way 1 2 3 4 5 TOPICS Comments and Q&A 6 IMPLEMENTING EFFECTIVE AML/FRAUD RULES
- 5. Reputation Integrity Strategic Operations Cost THREAT 1.5m victims of account fraud had an intermediary account opened in their name first 200% Fraud Recovery Over 50% of respondents recover less than a quarter of fraud losses < 25% Money services & Cryptocurrency 48% https://www.paymentsjournal.com/ KPMG – The global banking fraud survey (May 2019) FRAUD IN BANKING STATISTICS
- 6. KEY STATISTICS AND WAY FORWARD AGREEMENTS Merge Fraud and FC functions 50% wants to invest on compliance solution Move away from siloed fraud / FC solutions Drive to reduce compliance cost INTEGRATED REPORTING EXIST 43% INTEGRATED GOVERNANCE INTEGRATED SYSTEMS EXIST https://www.paymentsjournal.com/ KPMG – The global banking fraud survey (May 2019) Integrate teams and processes 40% 38% NO INTEGRATION BETWEEN FRAUD & other FCs SUFFICIENT EXPERTISE TO DEVELOP RULES 40% 30%
- 7. Banking evolution Fraud evolution Compliance landscape Compliance cost Enterprise Compliance landscape Rules definition & maintenance Fraud evolution False positives & Reporting Practitioners Siloed Solutions Complex delivery Integration challenges Support & Enhancement Systems FINANCIAL CRIMES FUNCTIONAL CHALLENGES
- 8. KPMG – The global banking fraud survey (May 2019) FINANCIAL CRIMES FUNCTIONAL CHALLENGES
- 9. GRADUALLY ADOPTED STATE Effective and efficient rules to support People, Process, systems and digital evolvement should be configured to support the capabilities shown in the diagram. Banking enhanced compliance capabilities - underpinned by efficient fraud rules BANKING: FINANCIAL CRIMES CAPABILITIES (TARGET) Joined-up Enterprise Fraud Rules
- 10. Compliance regimes Card No present Social engineering Cyber/ online Scams Data Theft Internal fraud “Though systems can be perceived to be compliant with international and national fraud policies, guidelines and recommended controls… threats, both external and internal continues to evolve in line with digitisation growth and advances in banking technologies” …how we therefore implement fraud and AML rules needs to underpin the complex and dynamic nature of the fraud scenarios we are experiencing now and in the future. MANAGING EVOLVING FRAUD SCENARIOS & RULES
- 11. Compliance regimes Card No present Social engineering Cyber/ online Scams Data Theft Internal fraud MANAGING EVOLVING FRAUD SCENARIOS & RULES
- 12. Compliance regimes Card Not present Social engineering Cyber/ online Scams Data Theft Internal fraud MANAGING EVOLVING FRAUD SCENARIOS & RULES
- 14. Managing complexities in scenarios / rules processing and including flexibility4 When implementing an effective system there are some complexities
- 15. It is vital to begin with a detailed portrait of the firm’s FCC requirements before opting for a particular solution. A clear alignment between overall helps to optimise the FCC functionality. Managing complexities in scenarios / rules processing and including flexibility4
- 16. When preparing to design and conduct a Money laundering/terrorism financing risk assessment, an AML/CFT compliance professional must first understand and/or decide: The definition of Money laundering/terrorism financing risk in the relevant regulation The definition of risk in use within his or her firm The scope of the Money laundering/terrorism financing risk assessment The definitions of customer types (individual, company, government, …) The definition of regulated activity (product, service) Any legal prohibitions on certain customers under relevant sanctions regimes Managing complexities in scenarios / rules processing and including flexibility4
- 17. Key characteristics of a money laundering/terrorism financing risk assessment Address both ML and TF Includes assessment of organizational weaknesses associated with processes and procedures Deals with ML/FT risks of employees Has the means to measure and act on changes in the firm’s ML/TF risk, internally and externally Covers risk indicators gathered from suspicious activity reported by the firm in the past Covers the types of ML/TF risk that its peers in the industry have covered in their risk assessments Incorporates feedback received from regulatory or guidance bodies on the firm’s management of ML/TF risk Current and emerging trends in ML and TF Linked to the firm’s change-control processes Reviewed periodically for efficacy A successful risk-assessment methodology will be the one that: sets out clearly how it works leverages available external and internal information is easily updated can be explained and operated by staff in business units Managing complexities in scenarios / rules processing and including flexibility4
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- 20. 5 Compliance Accurate Case management User ExperienceAdaptable Ensures compliance with the requirements and regulations in force We build own and precise behavioral models based on Artificial Intelligence. KYC, KYT and Due Diligence in one application Customizable by means of parameterization and/or development by extensions Quick adaptation to the tool by the user
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