Understanding Financial Crime, its Implications & How to Combat it

Financial crime is a serious criminal offense that is escalating at an alarming rate. Worldwide losses due to financial crime have been estimated to have crossed 3 Trillion USD. Banks worldwide have been struggling to identify and combat financial crime in order to minimize risks.

Let’s have a look at the most common kinds of financial crime prevalent today and their magnitude of threat:-

Account Takeover: Account takeover involves having a fraudster take over another person’s account, first by gathering personal information about the intended victim, then contacting their card issuer by impersonating the genuine cardholder, and asking for mail to be redirected to a new address. As per a study conducted by Phishlabs in 2013, account takeover fraud grew annually by 69% worldwide.

Application Fraud: Application fraud takes place when a fraudster uses stolen or fake documents to open an account in another person’s name.

Check Fraud: Check fraud involves making use of checks unlawfully in order to acquire or borrow funds that do not exist within the account balance. As per a report released in 2014 by JPMC, 82% of bankers surveyed reported that checks were the primary target for fraud attacks at their companies.

Internal Fraud: Internal fraud is broadly defined as an employee’s misuse or misappropriation of an employer’s resources or assets for personal gain. 72% of organizations worldwide are said to have been plagued with insider fraud sometime or the other.

Money Laundering: Money laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity have originated from a legitimate source. According to a recent report released by KPMG, 88% of bankers globally see AML as a priority.

Phishing: Phishing is the attempt to acquire sensitive information such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by masquerading as a trustworthy entity in an electronic communication. Reports suggest that an estimated 5.9 Billion USD was lost to phishing in 2013 alone with North America being the most targeted geography.

Skimming:  The theft of payment card information is called skimming. The thief can procure a victim’s card number using basic methods or more advanced methods such as using a small electronic device (skimmer) to swipe and store hundreds of victims’ card numbers. In Europe alone, cash losses owing to skimming incidents exceeded 248 Million EUR in 2014.

Implications of financial crime are extensive. High-profile frauds & money laundering not only cause massive monetary losses but often lead to litigation costs due to non-compliance of various regulations. Apart from financial damages, organizations face irreparable blow to their reputation and hence end up losing potential customers. The only viable solution lies in implementing a strong combat mechanism that protects organizations against multi-channel fraud in real-time.

Combating Financial Crime

Initially, fraud was mostly an opportunistic crime committed by small-time fraudsters. But today, the banks and their customers face a very different world. As the size and sophistication of products, channels and services have grown, so have the types of fraud. Money laundering is also proving to be one of the most prevalent kinds of financial crime today. Therefore coming up with a robust combat strategy is essential for the management of financial crime. It involves the following:-

Alignment of Anti-money laundering & Anti-fraud efforts: Both fraud risk and money laundering are key containment areas within an organization with respect to operational risk management. It makes sense for the banks to implement a unified platform for both anti-fraud & AML that will facilitate optimization of the efforts of investigation teams.

Enabling customer state view: The new age fraud monitoring systems go way beyond fraud detection, they essentially provide fraud prevention and transaction decline solutions. For this to happen, the solution should be able to view the customer state view within the duration of the customer action completion.

Influencing outcome in real-time: Financial Crime has traditionally been detected through an array of post facto analysis software. While these systems are immensely effective in all the regulatory reporting, the one thing they fundamentally lack is to influence an outcome at point of interaction. Though most of the current generation fraud detection systems work in near real-time for processing transactions, banks need real-time fraud detection systems which can process banking events from core banking systems within milliseconds.

There is more to the ideal combat strategy. To know further, download our e-book ‘Guide to Managing Financial Crime in 2015’ here.

AML as a Service

AML as a Service

Past few months have seen a lot of activity from regulators, bankers and industry bodies alike towards curbing money laundering. Rules are becoming stringent and reporting more accurate. Then there were hefty fines levied on certain banks for non compliance with AML guidelines.

During our conversation with bankers, it consistently emerged that bankers have AML compliance as one of their top priorities. This is a clear outcome of lot of banks having plugged their technology for AML, leaving the banks which have not yet taken solid steps towards AML exposed to becoming a conduit for money laundering leading to take evasions, balck money and terror financing.

However, a major barrier these banks face is that technology investments are CAPEX which means budgeting for these investments at the beginning of financial year. It also necessitates a longer procurement cycle and boardroom discussions with other departments on redirecting budgets towards AML.

Second barrier is diversion of resources from revenue generation towards maintenance of AML technology, annual licenses,a project management team to monitor the technology and additional costs to incorporate the changing regulatory requirements.

Third barrier is upfront purchase of such technology entrenches the bank with the software vendor, making switching costs very high.

Understanding these concerns of our customers, CustomerXPs has launched Clari5 AML-as-a-Service to help them overcome the above mentioned barriers and provide a safe banking environment.

The first barrier of CAPEX is overcome by changing it to OPEX. This means that banks no longer have to make upfront investment in software, but use the ‘pay as you go’ model of monthly payments. This model of payments is more comfortable to the CIO, CRO and CFO.

Second barrier is taken care by the fact that there is no annual license, no maintenance required by the bank and incorporation of all the additional requirements come as part of the subscription.

Third barrier of entrenching with the software vendor is overcome by the fact that the subscription is monthly which means that banks can switch to other models with all risks covered.

Financial Crime in South Africa!

Financial Crime in South Africa is overwhelmingly omnipresent. According to Christopher Malan, Head of Financial Intelligence Center, South African banks have to work towards being more compliant in combating financial crime i.e. Terrorism Financing and Money Laundering.

Four big banks of South Africa were fined for R125 million by the Reserve Bank for failing being compliant to the regulations. Banks are highly criticized for forming cartels, and behaving monopolistically in the African region. This is one of the various reasons for high financial crime rate in South Africa.

According to PWC report, the biggest thieves are not the lowest paid or least educated but was quite opposite. The senior management are the main perpetrators in South Africa. The fraudsters are mainly in their thirties with University degrees.

The most common scams prevailing in South Africa are internal fraud, money laundering, e-mail scams, identity theft, remittance scams, bribing and corruption, and misappropriation of assets. The leading scam among all the above list is the internal fraud. This revelations by PWC has built a cloud of uncertainty and mistrust inside the organisation. This has  shattered the trust of customers on the financial organization.

Financial crime in South Africa has taken its toll on the lives of people. It has directly or indirectly affected the livelihood of people. Frauds and Scams have robbed people of their resources. It has drained the funds available for country’s development. By knowing what to look out for, one can avoid falling victim to common fraud and scams. Hence, the following infographics will give an overview of different prevailing scams in South Africa. I hope you find it useful.




Financial Fraud in Australia

Financial Fraud in Australia

Financial fraud is pervasive. Not only developing but developed countries grapple with fraud. With new channels of financial transactions opening up for consumers, it is becoming even more difficult to monitor fraudulent events in real-time. For instance, online banking & payment cards have become so ubiquitous that we cannot imagine transacting without them in our day-to-day life. On the other hand, banks are threatened by high levels of fraud that are associated with electronic transactions. In Australia, the total amount of money spent on payment cards was AUD 624 Billion in 2013. At the same time, an estimated AUD 1.4 Billion was lost to personal fraud that has emerged as the largest form of financial fraud in Australia.

This infographic below delves deeper into the fraud scenario in Australia and highlights ways to combat fraud in real-time.


Banking Customer Experience in Middle East

Banking Customer Experience in Middle East

The growing importance of customer experience has taken over the banking industry by storm. A recent report published by E&Y details out latest trends in customer experience from around the globe and suggests that banks should aggressively leverage valuable insights from customer behavior to effectively chart out their customer experience strategy.

The infographic below throws light on banking customer experience in Middle East and how implementing real-time technology solutions result in customer delight by making use of deep customer insights.



Fraud Landscape In Africa – The Pervasiveness of Online Fraud

Fraud Landscape in Africa

Financial Fraud has perpetrated the banking industry in big way. As more people use the Internet for their banking needs, the number of fraudsters eyeing online financial transactions has also multiplied. In Africa particularly , online fraud has proved to be one of the most pervasive forms of financial fraud and is hugely impacting the fraud landscape.

 This infographic below details out the fraud landscape in Africa and how use of innovative anti-fraud technology mitigates & prevents frauds from taking place in real-time.

Types of Fraud in Banking

Types of Fraud in Banking:

Fraud is an escalating threat for banks. Technological advancements and changing customer preferences have opened up new avenues of banking for modern consumers. But these channels of convenience have also attracted massive threat from fraudsters.  For instance, 41% of customers globally who have been victims of financial cyber fraud have failed to get even a single cent back. Fraudsters have not only perpetrated direct channels but have also gained entry within the banking system as insiders.

The following infographic throws light on the different types of fraud in banking and how use of innovative real-time anti-fraud technology mitigates & prevents bank frauds from taking place.


Continued Commitment to Fight Banking Fraud

Gartner recently published a report on Banking Vertical specific software. According to the report, the banking and securities vertical specific software market grew by 5.9%, riding on replacement of legacy applications in mature markets and new technology investments i emerging markets.

CustomerXPs features in the report as a notable vendor providing banking software. With our Clari5 suite of products, we continue to focus on Enterprise Fraud Management and Customer Experience Management for Banks. Inclusion in the report is confirmation of our focus and belief.

Around same time, Gartner published Market Guide for Online Fraud Detection. This guide provides recommendations to fraud managers for their strategic planning in using technology to combat Online Fraud. In this report too, CustomerXPs is mentioned as a Representative vendor. This inclusion is also a testament to credibility of CustomerXPs as a provider of software to fight banking fraud.

As I have written in an earlier post, there is a sense of satisfaction in receiving the positive feedback from the industry analysts and customers alike, a motivation to continue on the journey we have embarked and to keep committed to our goal of helping customers bank in a fraud free environment.

Customer Experience – The new bedrock for consumer banking

The new bedrock for consumer banking:

Customer experience is not a fad but has the potential to make or break a bank’s revenue. A recent research report from Capgemini revealed that more than half of bank customers are dissatisfied with their retail banking experience. The report also reveals that dissatisfied customers are increasingly choosing competing banks over their present service providers. Therefore, in order to stay profitable in the business, banks must invest in intelligent real-time technology that takes proactive care of customers’ needs and pain areas. Positive customer experience not only improves customer loyalty but also improves top-line for banks.

The infographic below highlights recent trends in consumer banking customer experience and how implementing real-time customer experience solutions would result in mutual benefits for banks and customers.


consumer banking customer experience.


Changing the Indian Banking Fraud Landscape with Real-time Fraud Prevention Technology

Banking fraud is a $3.5 Trillion global menace. Indian Banking Fraud number instances have increased considerably over the past few years. This surge in banking fraud has not only resulted in banks losing millions but also sustaining irreparable reputational damage. With such attacks becoming more frequent, RBI has mandated banks to comply with recommended measures to secure the technology infrastructure and improve fraud risk management practices for frauds across channels. There is thus a growing need for banks to incorporate strong combat mechanism for not only detecting but preventing frauds in real-time.

The infographic below highlights recent trends in the Indian Banking fraud landscape and how implementing real-time fraud management technology would combat such frauds in a fool-proof way.