BPM Analytics

Customer education and fraud awareness programs in the financial industry

Fraud in the financial industry poses a serious threat to the customers who lose money and the institution that loses its reputation. The American Banking Journal, a Washington-based trade association, states that for every dollar lost in fraud, the banks incur a direct cost of $4.

The customers are aware of potential risks, and 96% of them have security and fraud protection as an important factor in choosing a banking partner. Banks must use internal and external training and awareness programs to secure customers and ensure loyalty.

This article explains ways to make financial fraud prevention a part of the financial institution’s culture through training and awareness programs.

Making fraud awareness a part of the culture

Given the speed of online transactions, fraudsters can move the money quickly once they are successful. Prevention is the only way to have an upper hand. The financial institution needs to have its customers as partners to detect and prevent fraud.

Be aware of the types of scams

With digital scams, it does not mean the old methods are out. Always be on the lookout for forged and fraudulent documents, empty envelope deposits, and wire transfer frauds.

You can prevent wire transfer fraud by training employees to verify the authenticity of transfers. One simple method is to call the account owner on the number given in the request. For larger amounts, you must use more than one verification method.

Educate the customers about phishing

According to a report, over 75% of online banking payment fraud happens through trusted accounts and devices. This means either someone used the customer’s device or duped them into making the payment through phishing.
Fraudsters are getting better at making counterfeit emails and text messages seem genuine. The best way to prevent such activities is to ask your customers to be wary of clicking on direct links sent through text messages and emails. Such messages create a sense of urgency and panic to trick customers.

After the initial training, they may still make a mistake. You need to frequently follow up and remind them of potential danger. Remind them not to give personal information to anyone posing as a bank employee, no matter how urgent it seems.

Organise fraud awareness programs for employees

Your team could fall prey to online fraud as easily as the customer. Ask your IT team to include a message in the email if it originated from outside the organisation. For example – ‘CAUTION – This email originated outside the organisation. Beware before you open.’

Employees could be in a hurry to respond to emails or execute transactions and may fall prey to scams. Ensure regular training sessions and have a manual checklist ready for each employee as they work with emails and banking systems.

Review audit trails regularly

Have a team manually review daily audit trails, even if it is a time-consuming activity. Observe and flag things like excessive failed login attempts.

You can also have an AI-enabled fraud detection system that parses daily customer and employee activity and raises an alert if there is a significant deviation from the set pattern. The system would automatically alert the customers and the banking staff whenever there is an unusual activity. For example, login attempts from a new IP address or a different machine.

Strategic fraud prevention program

All employees must be trained on the financial institution’s unique fraud exposure and risk factors in line with the Enterprise-Wide Risk Assessment (ERWA). Avoid generic training programs to elevate risk compliance and employee preparedness. The employees should have a reliable chain of command to deal with a vulnerable customer at risk of getting scammed. A leading consulting firm highlights the following three lines of command in a firm’s ERWA:

  1. First line
  2. This includes the front-facing staff in the fraud prevention strategy. There should be a senior executive to coordinate the strategy through –

    1. Fraud strategy creation and implementation
    2. Analysis, recovery, and reporting
    3. Coordination between fraud prevention and cyber security

  3. Second line
  4. This team sets a holistic and well-structured picture of the firm’s risk exposure and sets the objectives to prevent fraud. They must regularly update the EWRA from the context of the financial institution’s activities and regulatory compliances. At this level, the institution must have adequate policies and procedures to train employees and prevent fraud.

  5. Third line
  6. This level includes an independent assessment of the institution’s risk management and fraud prevention preparedness. The third line of defence holds both the first and second lines accountable through internal auditing.

How can Infosys BPM help with fraud prevention?

The answer to the source of fraud lies in the financial data. There are social engineering patterns within the data, such as compromised credentials and theft and leakage of personal information. A fraud prevention solution will strengthen your customer education and fraud awareness program by highlighting aspects that you can miss manually.

Read more about fraud solutions in finance industry.

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