A brief overview of different types of fraud affecting financial services firms in Lithuania and elsewhere - this presentation was delivered to ISM students in October, 2014

1. A Brief Overview of Financial Fraud
Affecting the Banking Industry in
Lithuania
28th of October, 2014

2. Disclaimer!
2
# These are my views
# They do not necessarily reflect the policies or
views of my current or former employers
# The main purpose is to share ideas and promote
discussion

3. A few bits about myself
3

4. Regional Manager of Security
Main responsibilities:
• Health and Safety
• Robbery prevention
• Drive offs
• Shop theft
• Staff fraud
• Violence against staff
• Investigation of
security incidents
• Liaison with the police
4

5. A few bits about myself (cont’d)
5

6. 6
Regional Director of Security
Main responsibilities:
# Counter fraud and counter corruption
# Physical security
# Fraud risk assessments
# Internal/external investigations
# Training of staff
# Liaison with law enforcement
# Liaison with other financial institutions

7. Academic achievements
7

8. What do you know
about fraud in the
financial services
8
industry?

9. Common Elements of Fraud
# Dishonesty
# Fraudulent intentions
# Fraud by false representation
# Fraud by failing to disclose information
# Fraud by abuse of position
The Fraud Act, 2006
9

10. Fraud can be…
External Internal Collusion
10

11. 11

12. 12

13. 13

14. 14
Fraud can be…(cont’d)
Simple or Complex

15. Fraud can be…(cont’d)
15
opportunistic
or
premeditated

16. Opportunistic Fraud
16

17. 17
Opportunistic Fraud

18. Aimed at
financial
institutions or
their
customers
18
Fraud can be …(cont’d)

19. Where Do You Look for Fraud?
19

20. Types of Fraud Inherent in the
Financial Services Industry
20

21. Computer Crime and Cyber Crime
21

22. Credit Card Fraud
22

23. 23
Customer Account Fraud

24. Identity Fraud
24

25. International Fraud
25

26. Securities and Investment Fraud
26

27. Large Scale Corporate Fraud
27

28. 28
Large Scale Corporate Fraud

29. Lending and Credit Fraud
29

30. 30
Lending and Credit Fraud

31. Bribery and Corruption
31

32. 32
Money Laundering

33. Insurance Fraud
33

34. 34
Staff Fraud

35. Categories of Fraud Inherent in the Financial
35
Services Industry (cont’d)
1. Application Fraud
2. Facility Takeover Fraud
3. Misuse of Facility Fraud
4. Identity Fraud
5. False Insurance Claims
6. Asset Conversion
7. Staff Fraud

36. 36
Categories of Fraud Inherent in the Financial
Services Industry (cont’d)
Main categories of Financial
Crime:
1. Money Laundering and
Terrorist Financing
2. Fraud
3. Data Breaches
4. Bribery and Corruption
5. Sanctions and Freezes

37. 37
Reputational Risk
‘It takes 20 years to build a
reputation and five
minutes to ruin it’
Warren Buffet

38. Run on the Bank
38

39. 39
Run on the Bank

40. 40
Run on the Bank

41. 41
Financial and Operating Loss
Moral and Social
Responsibility
Economic Impact
Green, M. (2013)

42. 42
Cost of Fraud in the Financial Services Industry
Nederlandse Vereniging van Banke, 2014

43. Cost of Fraud in the Financial Services Industry (cont’d)
43
The UK Cards Association, 2013

44. Picture of Fraud in the Financial
Services Industry
44

45. 45
Main Issues/Challenges Faced by the
Financial Services Industry in Lithuania
# Fraud doesn’t occur here attitude
# Visible fraud vs. invisible fraud
# Lack of common fraud definitions
# Lack of fraud statistics
# Exchange of data on confirmed fraud
is prohibited by law
# Doesn’t share data on best practices
# Counter fraud staff lacks adequate
resources and training

46. Elephant in the Room
46

47. Issues with Law Enforcement
# Often lack resources,
adequate investigative
skills and motivation
# Don’t understand
banking / banking
products
# Often engage in ‘blame
the victim’ behavior
# Jurisdictional limitations
47

48. Technological advances allow for new
types of crimes to be committed
48

49. 49

50. Bank robberies in the Netherlands
Nederlandse Vereniging van Banke, 2014 50

51. 51
The Contemporary Crime Dilemma
‘If a network of Nigerian scammers
based in Amsterdam defrauds
French, Australian and American
credit-card holders, where does the
crime occur?’
‘Earning with the Fishes’, The Economist, 2014

52. General public lacks
awareness on fraud
risks inherent in
banking products
and how to
safeguard
themselves against
those risks
52
And finally…

53. Movie
Time!
53

54. 54
https://www.youtube.com/watch?v=F7pYHN9iC9I

55. 55
The weakest
link?

56. 56
The Customer

57. 57
Fraud Risk Management
in the Financial Services
Industry

58. 58
Main Elements
of Fraud
Prevention
Framework
Prevention Detection Investigation

59. Fraud Prevention
59
# Organizational
culture/Tone from the top
# Fraud Prevention Policy
# Know your customers,
staff, partners
# Fraud risk assessments
# Policies, processes and
procedures
# Fraud Risk KPIs
# Counter fraud training

60. Fraud Detection
# Internal/External Counter
Fraud staff
# Monitoring tools
# Audits
# Incident reporting
# Whistleblowing
60

61. How Do You Detect Fraud?
61
Fraudster 1
Fraudster 2
Fraudster 3
Fraudster 4
Fraudster 5

62. Fraud Investigation
# Internal/External
investigation
# Loss recovery /
Business Continuity
# Disciplinary actions
# Police investigations
# Lessons
learned/Adjustment of
processes
62

63. Time for a Test
1. Everyone stand up,
please!
2. Do you have a smart
phone?
3. Do you have a Gmail
account?
4. Do you use this App?
63

64. Thank you for your attention!
64