Managing Increased Risk
By Shari Shore
May 21, 2004

Summary: Shari Shore argues that the right technology – portal, reporting, business rules and business analytics - can help predict, protect against and prevent fraud in the financial sector.

Full Text (Page 1 of 2)  

Today’s financial organizations face a growing risk of fraud and abuse, and as a result are trying to manage the growing number of regulatory compliance measures recently passed to combat nefarious activity. The pressure for companies to protect themselves has forced firms to increase man-hours and squeeze existing resources, putting financial strain on companies trying to reduce costs in a tough economic climate.

Technology and the Internet have benefited financial businesses in countless ways and can continue to assist institutions as they focus on what's required to fight fraud, money laundering and identity theft. By using technology to put more structure around existing security processes, organizations can streamline and automate important fraud-prevention tasks, such as monitoring potentially risky transactions. The automation of these tasks can increase operational efficiencies and help companies utilize existing resources more effectively, ideally in areas that impact the bottom line.

Financial organizations must evaluate current processes in place, identify potential weak spots and investigate the technology available to help them be more proactive when it comes to fraud detection and prevention.
 
The first step is to take an objective look at how well your company is faring in three critical areas: regulatory compliance, ‘know your customer’ practices, and transaction monitoring and surveillance.

Regulatory compliance
Today’s compliance officers, inundated with new fraud-related legislation, are feeling the heat to meet ever-expanding and complex regulatory requirements. The new requirements, while necessary, have left some firms scrambling internally to keep track of changing rules, institute new reporting mechanisms and meet deadlines. In order to ease the process of complying with new regulations, it is recommended that firms evaluate current procedures by asking the following questions:

- Do your employees have a centralized method to access information about regulatory guidelines or do they rely on a combination of manuals and online databases? 

- Does your system allow users to customize and update data as new guidelines are released?

- Does your existing solution automatically alert employees about upcoming deadlines?

Know your customer
A recent survey by Star Systems found that two-thirds of Americans believe that the financial services industry needs to do a better job of verifying the identity of customers who open bank accounts and credit card accounts. Through the USA PATRIOT Act, financial institutions are required to implement new procedures for collecting customer information. So now is the time for organizations to determine if technology could improve their current process in place:

- Is your system for identifying and qualifying customers tied to your solution for monitoring regulatory requirements, allowing information to easily be shared between the two?

- Do you have extensive visibility into your customers’ transaction history that allows employees to identify trends or patterns in behavior?