New research from TowerGroup has revealed that it is essential to treat fraud management as an offensive strategy, as opposed to the reactive process, in order to combat the growing levels of existing fraud in the financial services sector.
Although many good tools and technologies for fraud detection exist, a truly holistic approach to fraud management remains elusive for many financial institutions (FIs), revealed the report.
TowerGroup noted that there has been an unfortunate trend toward dividing, departmentalizing, and otherwise separating fraud management from the core businesses of financial services. Detection, alert, and case management practices are too often viewed as separate and discrete activities.
All of this is, unfortunately, good news for fraudsters who are increasingly able to exploit gaps and weaknesses in fraud protection and management strategies.
TowerGroup believes that an enterprise approach to fraud management has become a definitive requirement in combating fraud – in terms of prevention and successful detection, escalation, and adjudication. It estimates that the potential return on the cost of fraud management is as high as $8 returned for each $1 spent.
Without a continuous cycle of holistic fraud strategy management, institutions are leaving their customers, their bottom lines and their reputations open to existing, emerging, and worse, yet unknown methods of fraud. At the same time, by defaulting to a purely tactical approach, costs increase each time a new threat emerges.
Ideally, institutions must foster a culture where vigilance becomes a way of doing business, and stopping fraud becomes an investment and a customer value proposition, instead of just an added cost or responsibility.