Proactive fraud monitoring for banks in India
Buying an off-the-shelf system may not equip the bank with the most effective technical paraphernalia or strategic methods to deal with frauds. Selecting the right framework and a seamless integration of bank systems with the fraud monitoring system is integral to safeguard business and customer interests.
Why is fraud monitoring imperative?
- According to RBI-released data, banking-related frauds have doubled in the five-year period between 2004 and 2009.
- In 2009, the total number of bank frauds was recorded at 23,914, amounting to a loss of INR18.83 billion, where less than 1% of the fraud cases amounted to INR10 million each or even more.
- The last reported count of online fraud cases was 269, amounting to INR590 million.
- With acquisitions and expansions spurring the growth in size and customer base, banks are witnessing a substantial rise in the numbers and complexity of fraud scenarios. As such, there is a stringent need for robust monitoring.
- The regulator has directed financial institutions to continuously monitor transactions and establish an integrated fraud risk management framework.
- There is an increasing need to identify early warning signals to capture frauds close to their occurrence.
- A centralized framework can address fraud risks associated with various business units and products and provide insights to stakeholders to take preventive action at the right time.
- This also eliminates uncertainty around losses due to fraud and helps the management have a more focused strategy to address fraud-related risks.
What should your company consider while evaluating a “fraud management” strategy?
- How well do existing fraud identification and monitoring methods control current and emerging risks and are they commensurate with the size/operations of the organization?
- How effective have they been in preventing frauds before/at occurrence?
- What is the vision for fraud monitoring in the next five years to overcome challenges?
- How responsive are they to new threats and how quickly can they be adapted to detect new fraud patterns?
- Do they allow the management to make changes to detection rules without the need for the involvement of IT?
- Does it provide a comprehensive MIS for the senior management for oversight and supervisions for the organization as a whole?