When a group of Nigerian criminals set up five phony accounts at BankBoston, they had grand plans of stealing thousands of dollars through a fraudulent check deposit scheme. As fate would have it, the bank had recently installed a deposit fraud detection system that sifts nightly through all transactions and flags suspicious deposits. In the Nigerians' case, it was an uncharacteristic $40,000 deposit.
Bank officials telephoned the bank where the check was drawn and were referred to the FBI, who helped identify four other accounts at BankBoston that the criminals planned to use to bilk the institution.
While BankBoston's John McCarthy, executive director of banking operations, allows that "maybe" the bank's old system would have detected the first fraudulent transaction, he adds, "The system has, from our perspective, (almost) paid for itself." Bill Semler, the senior operations officer in charge of the system, puts it more succinctly: "We were able to save $40,000 on that day, and there was potential for a lot larger loss."
Bank officials chose Carreker-Antinori's ASI/19 deposit fraud detection system, in part, because the bank had worked well with the company before and because Carreker-Antinori agreed to install the system before May 23, 1997othe day on which the bank merger would be completed.
The ASI/19 deposit fraud detection system is designed to go beyond negative databases and other subscription services by employing filter settings that detect suspicious deposit activity based on criminal trends and behavior. The company works in partnership with Backroom Enterprises, which helped BankBoston tweak the settings of the detection system for optimal results. The parameters are geared to consider the customer's history with the bank (how long the account has existed), the deposit channel and normal deposit patterns for that product set. "It's important to us (to sort) not only by product, but also by source," McCarthy says. "....Our ability to track allows us to improve our ability to anticipate."
As planned, the deposit fraud detection system went live in all BankBoston's Massachusetts branches by the time the Bank of Boston-Bay Banks merger was completed. The system was purchased in the course of the merger because the banks realized their fraud detection systems were incompatible and inadequate for the newly merged bank. "The weakness on the Bay Banks side was that (officials) were looking at too many accounts to find the ones they were really interested in," Semler says. "And on the Bank of Boston side, we didn't have some of the controls that we needed for the ATM strategy."
The system represents the combination and codification of all the expertise of BankBoston's fraud detection specialists, plus the intuition of other experts in the field. "We find it's impossible to replace people who have been doing this for a long time, and yet you can capture their judgment, put it into code that recognizes certain behavioral patterns that they would know intuitively," McCarthy says. "But it's very difficult to put that in a three-ring binder and teach it to someone else."
BankBoston has been adjusting the settings frequently, but an average of 200 transactions are pulled for review by an analyst each night, Semler says, out of the more than two million transactions conducted on an average day.
Carreker-Antinori officials are hesitant to release pricing information, but say a bank with $60 billion in assets, like BankBoston, would pay from $150,000 to $250,000 for the system, depending on the number of transactions and data centers involved. Since its installation at BankBoston, the system has caught more than half a million dollars in extremely questionable deposits. "We have been able to identify $570,000 of suspicious activity that we really took some action on," Semler says.
And as for the Nigerian check cashing ring, one person was arrested and authorities are close to nabbing another, Semler says. He concurs with McCarthy that the old system might have caught the crooks, but adds, "I'm very happy the software picked it up. We knew it was working at that point."