Ferreting Out New ACH Fraud

As fraudsters become more sophisticated, banks are being forced to rely upon a broader arsenal of electronic tools and techniques to root them out.

"Criminals are moving across channels and you need to have an enterprise view of fraud to catch the fraud," says Avivah Litan, vp and distinguished analsyt for Gartner. "You can't just look at the ATM channels or the check channels to catch the bad guys."

One vendor that's helping banks take a more comprehensive view of fraud is Memento Inc. The Concord, MA-based provider of fraud and compliance management software offers a search engine available through its Memento Security system to help banks identify possible fraud through all types of Automated Clearing House (ACH) transactions, including checking and wire transfers. Memento works with bank customers to help them collect the "right" data by providing them with a list of all possible ACH transactions and then entering the information into the search engine, says Mike Braatz, vp of marketing for the company.

The search engine then sifts through the data by applying business rules and analytics to help detect possible instances of fraud or other suspicious activity. Bank analysts and investigators receive alerts through the Windows-based software and are able to launch into a forensic investigation using their browsers, says Braatz.

"Finding fraud is like finding a needle in a haystack," says Braatz. "You're talking about hundreds of millions if not billions of transactions that you have to sift through to identify possible fraud. It's much more about the speed and scalability of managing volumes of information," he adds.

The strength of the Memento technology is in its "Google-like" search capabilities, says Litan. "It's really good if you want an easy-to-use, easy-to-implement non-real time fraud detection system," says Litan. Although each customer implementation is different from the next - where some customers are receiving notifications every few minutes - typical banking customers see their alerts when they boot their systems up each morning following nightly batch processing runs, says Braatz.

Litan says she's also impressed with the relatively low costs associated with the premise-based system. Braatz placed the cost of the service between $100,000 and a "low seven-figure" annual investment for bigger banks. One of the differentiators for Memento, says Braatz, is its use of a managed services model for pricing the software where customers pay an annual fixed fee under a three-year agreement instead of paying for a perpetual license and annual maintenance costs.

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