Information theft highlights the latest bank security problems

Oct 10, 2006 3:51 PM

The threats of information theft and data breaches have transformed the banking industry, according to Steve Solberg of Fortent, New York, a company specializing in anti-money laundering and anti-fraud technology.
"The financial cost of fraud to a company may be three or more times the value of the fraud loss amount," Solberg, Fortent's fraud product manager, says in a white paper.
"Fraud is not static," he continues. "It continues to evolve with criminals, typically following the path of least resistance. Once new anti-fraud measures are implemented, criminals move to another scheme until they figure out how to beat those measures."
Trends from the white paper include:
* Check fraud isn't going away -- Despite the fact that electronic payments are rising at 12.9 percent per year, the total amount of attempted check fraud is more than $5.5 billion annually, according to a 2004 ABA Fraud Survey.
* New opportunities for employee fraud are emerging -- The threat of information theft is causing as much concern as the theft of funds. In today's automated bank environment, customer account information is readily accessible in branches, offices, and call centers throughout the world.
* Criminals thwart rules-based systems -- Intelligent systems can learn criminals' behavior and guard against risk in real time. Banks are required to use these advanced systems to stay ahead of fraudsters, who are keenly aware of reporting requirements that raise alerts.
* "Silo" mentality weakens fraud detection -- Because many banks' Check Fraud Detection and Credit Card Detection departments often do not share systems, the same criminals can prey on customers in different divisions without raising a bank-wide red flag.
* C-suites are moving toward an enterprise focus on anti-fraud systems -- Fraud carries significant reputational risk, reduces customer confidence, and can damage an institution's market capitalization and profitability. A more powerful fraud detection infrastructure "can contribute to cost reductions and total operations efficiency . . . [including] reduced investigative staff and premises expenses, as well as lower systems costs in the long run," Solberg says.

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© 2012 Penton Media Inc.

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