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BID Daily Newsletter
December 04, 2012

BID Daily Newsletter

December 04, 2012

ROBOTICS, TECHNOLOGY AND FRAUD PREVENTION

Over the years, cameras have become more powerful, electronic parts have become cheaper and more readily available and sensors are better than ever. This has set the stage for robotics to take off according to researchers. The latest focus in this area is creating robots that interact with people. Experts say things are moving so fast that within 10Ys, people will have robots in the home that will perform house chores, monitor the home, serve drinks and other things for as little as $25,000. This will be pretty nifty if it happens. On the banking front, we think robots could also play an interesting role, particularly when it comes to fraud. Maybe we could arm them with futuristic ray guns to stop the bad guys in their tracks or have them wave their arms frantically and shout "danger, danger" when they see something odd. As we wait for technology to catch up to reality, we focus today on analysis from the Information Security Media Group in the area of fraud. They found the five most often cited types of fraud banks had experienced in the past 12 months were: credit/debit card (84%); check (76%); phishing (50%); ACH/wire account takeover (43%); and ATM/ABM skimming, etc. (35%). The crooks have become more sophisticated, so banks have had to adapt to deal with these issues. Much improvement has occurred here, but more can be done. Among some of the most effective techniques banks may want to consider setting up a way for employees to alert management on a confidential basis; improve employee training to help everyone understand what to look for; review business practices end to end to see if there are holes; audit higher risk areas to be sure fresh eyes are looking at potential risks, etc. Teaching customers what to do and where to get computer security updates (as you encourage them to help themselves help you), are also good ways to reduce fraud. Believe it or not, we really aren't that far away from our robotic examples in this area. A few decades back in fact, most banks began to incorporate statistical modeling into their processes in an attempt to review and flag potentially fraudulent transactions. While crooks have become more intelligent and sophisticated in their attacks, this approach remains a good way to monitor customer behaviors over time and flag any that seem out of order. We have heard over and over again from bankers that say their customers are quite happy when they get a call from the bank telling them about a given transaction and asking if it is legitimate. Customers want safety, they crave it in fact, so analyzing transactions and communicating with customers is a great way to protect your bank as you build loyalty. As we close our discussion today, we revisit the original survey to highlight the next 5 areas where banks have experienced fraud in the past 12 months to help keep you informed. This group includes: money laundering (25%); third party POS skimming (23%); internal financial theft (21%); information theft, loss or attack (18%) and online banking breach (17%). These too are all areas where community bankers should have a plan. Whether it is a loss of money, productivity, customers or reputational impact, the consequences of fraud of any sort can be nasty. Until there is a robot to protect us all, we will just have to stay on the alert as we seek to continually protect the bank.