WHAT IS THE ANSWER?
All three research studies – from Javelin, ISMG and Longitude – found hopeful news in fraud trends as well. Financial institutions and government agencies are fighting back with stronger investigative teams, better analytical tools and more skilled staff.
Step 1: Establish a strong financial crimes investigation unit (FCIU)
Banks are stepping up their investment in FCIUs. In addition to putting more focus on financial crimes, FCIUs enable banks to collect, share and disseminate intelligence across borders, business lines and silos of risk, where ordinarily that intelligence is not shared.
“The FCIU is a relatively new concept that has gained traction since the global financial crisis,” Longitude said in its research.
There’s still work to be done. Just 11 per cent of banks say they have fully established FCIUs across all geographies and divisions. Nearly half (49 per cent) said they will have a fully established FCIU within three years.
Step 2: Invest in advanced analytics
One way leading organisations work to keep pace with fraud schemes is through advanced analytics, such as predictive models, link analysis, machine learning and anomaly detection. These technologies supplement the basic conditional logic and business rules commonly used today.
Few organisations are there yet. While 74 per cent of respondents to the ISMG survey have implemented fraud detection and transaction monitoring systems, a closer look suggests these technologies may be rudimentary.
More than half are not currently deploying advanced data and analytics tools such as behavioural analytics, predictive analytics and social media analysis and 43 per cent said they can’t get a consolidated view of customer activity across the enterprise.
It’s no surprise nearly one-third of respondents say their organisations lack the technology capacity to properly detect and respond to fraud.
On the bright side, 26 per cent say their organisations will invest in big data analytics. Longitude Research confirms this trend; 87 per cent of respondents cited big data analytics as the leading technology tool for their bank’s FCIU.
The Forrester Wave™: Enterprise Fraud Management Q1 2016 says machine learning is a vital factor that “now dictates which providers lead the pack.”
Investments here will undoubtedly help resolve some of the current deficiencies in fraud detection.
Step 3: Build the skills to use the tools
A bright new analytics platform won’t deliver on its promise if users don’t have the training to use them well. Data science is the new, hot discipline, and organisations need to invest in data scientists internally or contract with third-party experts.
Where do you find them? The skills gap is real. In the ISMG study, 42 per cent of respondents said their organisations lack the staff expertise – particularly data scientists who can manage the tools.
“It’s one thing to find quantitative scientists, but it’s difficult to find quantitative scientists who understand a certain government sector or commercial banking,” David Stewart, Director of Financial Crimes Solutions at SAS said.
Longitude research confirms it: 71 per cent of respondents report having difficulty hiring specialised talent for their FCIUs – and it’s even more difficult for small or fast-growing banks.
It’s not because they’re not looking. When they seek to hire staff members, 85 per cent of banks look to existing cybersecurity professionals; 84 per cent search software companies; 61 per cent tap universities; and 50 per cent look to the government intelligence community.
They are scouring diverse sources, but demand for analytics talent is so great that good candidates are hard to find and harder to land.