In the first blog of this series, we examined how robust fraud prevention and detection systems extend beyond loss mitigation to enable novel digital service offerings and substantially reduce customer service costs. In this subsequent exploration, we delve into a critical yet frequently underutilised aspect: how cross-functional collaboration in leveraging these technologies can yield enhanced benefits for the entire organisation, aligning with each department’s key performance indicators (KPIs).
Below, I have outlined the unique concerns of key functions within a financial institution. While the Three Lines of Defence model typically places primary responsibility for digital channels with their respective owners, a deeper examination through the lens of RACI (Responsible, Accountable, Consulted, Informed) principles reveals specific accountabilities and shared interests across departments in combating digital threats.
As evident from the diverse concerns of all stakeholders, it is crucial to examine how fraud prevention and detection systems can effectively address these challenges. Let us delve into each aspect.
Malware
Malware poses a significant threat to multiple customers, potentially leading to substantial financial losses and reputational damage. Robust fraud prevention systems are instrumental in detecting malware presence on customer devices in real-time. This early identification enables companies to promptly issue proactive alerts, guide customers to appropriate remedial actions, and prevent widespread financial and reputational harm.
Data breaches
Data breaches carry severe consequences, ranging from ransomware attacks to substantial legal and reputational liabilities. Advanced fraud prevention and detection systems are paramount in addressing this issue. These systems can identify and block unauthorised access attempts, including sophisticated bot attacks, thereby preventing compromised credentials from resulting in full-scale data exfiltration.
Regulatory breaches
Compliance with stringent regulations, such as preventing access from sanctioned countries and combating money laundering (AML) activities, is of utmost importance. While accountability for money mules may occasionally fall between the Compliance and Fraud Risk teams, unified fraud prevention systems provide powerful tools. By detecting suspicious patterns, such as IP address anomalies, multiple account access from a single device, or a single account accessed from various devices, these systems can accurately identify mule activity and provide critical geolocation data, significantly enhancing regulatory adherence.
Frauds
In addition to mitigating financial and reputational losses, avoiding regulatory fines, implementing fraud prevention systems also entails their advanced capabilities that extend beyond mere detection. These systems proactively identify and block fraudulent transactions, safeguarding customer assets and preserving trust.
System downtime
System downtime, often a drastic measure employed to contain large-scale incidents such as severe malware attacks or suspected data breaches, can incur substantial financial losses and customer dissatisfaction. By providing real-time intelligence and proactive threat mitigation, robust fraud prevention and detection systems can effectively minimise the necessity for such disruptive outages, thereby ensuring uninterrupted service availability.
Risk profile and appetite
Large corporations regularly conduct Risk and Control Self-Assessments (RCSAs) to identify operational risks, evaluate existing controls, and ascertain residual risk. By implementing a sophisticated fraud prevention system, companies can demonstrably reduce their residual risk exposure, thereby enhancing their overall risk profile and aligning with their risk appetite.
Final thoughts
Ultimately, establishing a compelling business case for advanced fraud prevention systems necessitates a comprehensive perspective. The fraud risk team should actively engage in cross-functional discussions, involving Digital Channel owners, Information Security, Compliance, IT, and Operational Risk departments from the outset—ideally during the Request for Proposal (RFP) stage.
Documenting the specific requirements and desired outcomes from each department ensures that the selected solution not only mitigates fraud but also quantifiably contributes to shared KPIs, driving profitability and resilience across the entire digital banking ecosystem. It is not merely about safeguarding against financial losses; it is about facilitating growth and strategic advantage. All the benefits derived from implementing a fraud prevention and detection system should be meticulously documented.
