There is a significant shift in the fraud landscape, with increasing fraud risk rapidly growing across the financial institutions. Fraud is cited as the most accelerating problem of the digital world. Exposure in online payments is on a rising toll, resulting in a big switch to mobile and digital apps, leading to swifter and smooth payment executions. Due to this, banks and systems get less time to detect and identify hidden funds when required. Furthermore, fraud is conducted in a sophisticated manner in the deep dark web.

Major types of emerging and increasing frauds

Money Laundering and Terrorist Financing – Both money laundering and terrorist financing goes arm in arm, firstly illegal money is laundered then sponsored for terrorist activities.
Identity Fraud/Thefts refers to a crime in which the criminal acquires and use the victim’s data particularly in extracting his/her money or credit in an unlawful manner through illegal ways for wrong motives such as making transaction, online purchases or getting a tax rebate. The contextual information of people is sourced through loan application forms, online purchases, digital wallets, mobile banking, internet resources, from lost or stolen wallets or phishing frauds, or through medical and financial data.

AML Challenges_Identity thefts and data breaches

Types of Identity Thefts
  • Account Takeover (ATO) refers to inappropriate use of credentials (name, signature, etc.) and seizes control on a bank account without the owner’s permission and fraudsters performing unauthorized transactions such as fund transfer, online transactions, and shopping.
  • Driver’s License Identity theft is a prevalent form of Identity Theft. The person involved in stealing your identity may purchase things in your name also manage to obtain other forms of identifications with their photo and use them for unlawful activities.
  • Mail Identity theft is a very popular identity theft (ID) in which the criminals steal your sensitive and personal information to access your financial data, then make purchases, or even apply for new credit cards.
  • Online Shopping fraud / Ecommerce thefts refer to a criminal accessing customers’ payment or sensitive information through hacking systems later using them to purchase groceries, clothes, or goods online without the owner’s knowledge.
  • Social Security Number Identity theft could happen from tax identity theft or even circulars floating in your mailbox. With the stolen SSN numbers the thieves can easily commit crimes and fraud in your right name or also create another identity, exploit further for their selfish intentions.
  • Senior / Elder scams are crimes in which the elders are targeted with all kinds of schemes; criminals take advantage of their isolation and lack of technical know-how. The elders are soft targets and can be easily duped by taking their account or card information and used for criminal activities.
  • Email compromise (entity/business) is an increasing phishing fraud; the criminal takes control of your business email account by a hacking password then conducts wire transfers and such unlawful activities.
  • Insurance Fraud is any act executed to deceive an insurance process. Insurance fraud occurs when an individual or establishment makes incorrect insurance claims to acquire advantages or remuneration for which they are not entitled to or owned.
  • Credit Card and Debit Card Fraud is an example of Identity Theft (ID) in which both the cards are used without the owner’s knowledge to make unauthorized purchases, shop online / offline, or retrieve funds using the victims’ account.

Fraud identification and mitigating frauds are the heart of every risk management system. Banks select EFM solutions with features satisfying their overall work processes and framework requirements. Several functions and features are important to be considered while making an EFM platform selection. It should detect and prevent frauds across all channels, considering a lot of aspects such as customer financial data, mobile data, user access data, user demographics, financial patterns, etc.

Financial institutions experience hidden challenges while integrating the EFM platform into their system such as reducing losses, detect and mitigate rising frauds and enhance the customer experience. The fraud management solution should also consider integrating options, smooth arrangements, customer service experience, machine models, e-commerce fraud combating solution with a combination of ML and human intelligence, and much more. Banks are adapting updated technologies in EFM solutions against legacy methods to prevent and combat identity thefts.