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ISM ppt October 2014_final

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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

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ISM ppt October 2014_final

  1. 1. A Brief Overview of Financial Fraud Affecting the Banking Industry in Lithuania 28th of October, 2014
  2. 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. 3. A few bits about myself 3
  4. 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. 5. A few bits about myself (cont’d) 5
  6. 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. 7. Academic achievements 7
  8. 8. What do you know about fraud in the financial services 8 industry?
  9. 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. 10. Fraud can be… External Internal Collusion 10
  11. 11. 11
  12. 12. 12
  13. 13. 13
  14. 14. 14 Fraud can be…(cont’d) Simple or Complex
  15. 15. Fraud can be…(cont’d) 15 opportunistic or premeditated
  16. 16. Opportunistic Fraud 16
  17. 17. 17 Opportunistic Fraud
  18. 18. Aimed at financial institutions or their customers 18 Fraud can be …(cont’d)
  19. 19. Where Do You Look for Fraud? 19
  20. 20. Types of Fraud Inherent in the Financial Services Industry 20
  21. 21. Computer Crime and Cyber Crime 21
  22. 22. Credit Card Fraud 22
  23. 23. 23 Customer Account Fraud
  24. 24. Identity Fraud 24
  25. 25. International Fraud 25
  26. 26. Securities and Investment Fraud 26
  27. 27. Large Scale Corporate Fraud 27
  28. 28. 28 Large Scale Corporate Fraud
  29. 29. Lending and Credit Fraud 29
  30. 30. 30 Lending and Credit Fraud
  31. 31. Bribery and Corruption 31
  32. 32. 32 Money Laundering
  33. 33. Insurance Fraud 33
  34. 34. 34 Staff Fraud
  35. 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. 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. 37 Reputational Risk ‘It takes 20 years to build a reputation and five minutes to ruin it’ Warren Buffet
  38. 38. Run on the Bank 38
  39. 39. 39 Run on the Bank
  40. 40. 40 Run on the Bank
  41. 41. 41 Financial and Operating Loss Moral and Social Responsibility Economic Impact Green, M. (2013)
  42. 42. 42 Cost of Fraud in the Financial Services Industry Nederlandse Vereniging van Banke, 2014
  43. 43. Cost of Fraud in the Financial Services Industry (cont’d) 43 The UK Cards Association, 2013
  44. 44. Picture of Fraud in the Financial Services Industry 44
  45. 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. 46. Elephant in the Room 46
  47. 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. 48. Technological advances allow for new types of crimes to be committed 48
  49. 49. 49
  50. 50. Bank robberies in the Netherlands Nederlandse Vereniging van Banke, 2014 50
  51. 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. 52. General public lacks awareness on fraud risks inherent in banking products and how to safeguard themselves against those risks 52 And finally…
  53. 53. Movie Time! 53
  54. 54. 54 https://www.youtube.com/watch?v=F7pYHN9iC9I
  55. 55. 55 The weakest link?
  56. 56. 56 The Customer
  57. 57. 57 Fraud Risk Management in the Financial Services Industry
  58. 58. 58 Main Elements of Fraud Prevention Framework Prevention Detection Investigation
  59. 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. 60. Fraud Detection # Internal/External Counter Fraud staff # Monitoring tools # Audits # Incident reporting # Whistleblowing 60
  61. 61. How Do You Detect Fraud? 61 Fraudster 1 Fraudster 2 Fraudster 3 Fraudster 4 Fraudster 5
  62. 62. Fraud Investigation # Internal/External investigation # Loss recovery / Business Continuity # Disciplinary actions # Police investigations # Lessons learned/Adjustment of processes 62
  63. 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. 64. Thank you for your attention! 64

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