It is high time for businesses such as banks and large retailers to invest in and integrate fraud technology into their existing infrastructure. The COVID-19 pandemic has forced businesses to shift to remote operations and working environments. However, this comes at a hefty cost considering every dollar of fraud now costs a U.S. business $3.36.
Since the shift to a remote environment, fraud has increased by 7% due to the lack of barriers and preventive measures in online environments. To keep it simple – fraud can be detrimental to your business resulting in thousands of dollars (if not more) in lost revenue. Therefore, your business must deploy solutions to catch fraud before it can cost your business.
1. Ability to Catch Fraud Remotely
Given the recent shift in the industry’s behavior from mostly in-person to online banking transactions, many in-person fraud prevention methods have become obsolete or relatively ineffective. The rise in remote financial transactions for personal and business needs has also increased the instances of “person-not-present” fraud activities.
It’s important to distinguish the difference between “person-not-present” and “card not present.” In a card not present scenario, the customer may be physically in front of you but does not have a card. Instead, they may enter their card number manually, followed by a PIN. However, in a “person-not-present” scenario in the banking industry, the customer is not physically present during the transaction.
The “person-not-present” scenario usually happens when a customer is filling an online loan application, credit card application, and online banking actions such as account logins, money transfers, and online shopping. There is no way for businesses to know who is on the other side of the online transaction. However, some fraud technologies can help you catch fraud in a remote environment as well as in-person.
2. Detect Synthetic Identities
Cybercriminals are becoming more proficient by the day in combining real and fake information to synthesize a unique ID. This ID does not really exist; neither can you associate it with a real person. Thus, it is known as a synthetic identity, and the fraud conducted using these IDs is referred to as synthetic fraud.
Fraudsters gather and combine real elements of the synthetic IDs from various sources and people. This information may include name, date of birth, Social Security Number, credit card details, bank account details, driver’s license number, and other valuable and sensitive information.
Fraudsters use these synthetic identities to apply for loans, credit cards, and open lines of credit without any intention of payback. Since there are no real victims involved in the synthetic identity frauds, they can go unreported and unnoticed for long durations.
By the time a bank or financial institution realizes the presence of fraud, it is usually too late, leaving them with no choice but to absorb the losses. However, some fraud technology capabilities can identify synthetic identities that are usually difficult to catch, even during person-not-present transactions and verifications.
3. Save Money in Lost Revenue
Fraudsters can cost your financial institution thousands if not millions in revenue. For example, a typical business usually loses 5% of its annual revenue due to fraud. According to a survey conducted by ACFE, more than 20% of cases surveyed lost more than $1 million due to fraud. The same study also found that the average loss accumulated to $145,000, and it was not till 18 months after the fraud when they detected the foul-play.
The cost of fraud can be unforgiving both financially and for business’ reputation. Some victim organizations never recover from their losses; therefore, it is critical to deploy fraud technology proactively. Moreover, as a bank or a financial institution, you must stay compliant with the AML/BSA regulations. Failing to do so may result in hefty fines by the regulatory authorities.
According to statistics by Fenergo, global financial institutions within the U.S. paid a staggering $26 billion in fines for non-compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) sanctions in the last decade alone.
The United States Department of Justice is one of the most stringent regulators globally when it comes to penalizing the financial institutions for non-compliance. The U.S. alone levies half of the global fining amounts related to AML/KYC non-compliance, which is nearly $14 billion. With fraud technology, banks and large retailers can prevent violating AML/KYC/BSA compliance regulations and catch fraud in real-time.
4. Spend Less Time on AML Risk Assessments
A risk assessment is the process of comparing the information collected in the KYC phase of onboarding with the list of individuals on your database known for sanctions, corruption, bribery, criminal activities, suspicion of money laundering, terrorist activities etc. To stay AML compliant, financial institutions and banks must perform risk assessments. This is critical to avoid working or facilitating high-risk clients or fraudsters.
Risk assessment is a time-consuming process and requires resources. However, it is valuable as well as critical, especially when you are attempting to catch fraudsters down the line. Some fraud prevention technologies have heightened accuracy levels to help prevent fraudsters from slipping through the cracks. You can implement a fraud technology that suits your business infrastructure and catch sophisticated cyber criminals by simply scanning the barcode on their IDs.
5. Build a Reputation for Anti-Fraud
It is understandable if you do not want to advertise that your business has a fraud problem. However, from an ethical standpoint, having a fraud technology as a solution in place to prevent fraud and protect your customers from potential threats is the ethically right thing to do.
This can also help your business identify flaws in your existing fraud detection protocols. By implementing a fool-proof fraud technology, you will be able to ensure that you are securing your business from all fronts. Hiring a BSA officer is not enough; giving them and the respective parties a reliable solution will help your business build a culture of trust. Moreover, it will support your organization to prevent fraud in real-time.
Seek Expert’s Assistance
The COVID-19 pandemic has ushered in the era of online transactions, where customers and businesses are opting for contactless payments. However, it also leaves banks and financial institutions vulnerable to person-not-present frauds.
During these pivotal times for the industry, banks and financial institutions must invest in fraud technology to safeguard themselves as well as their customers. Intellicheck is an identity authentication solution with a proven track record of working with many government agencies across the United States. Intellicheck offers excellent solutions for both in-person and online transactions to catch fraudsters before it’s too late. Intellicheck’s solutions are not only easy to use and integrate but will save you time while reducing the risk of missed fraudsters.