Cyber criminals are employing increasingly sophisticated methods to perpetrate financial crimes. This is evidenced by a dramatically growing number of Automated Clearing House (ACH) and wire fraud instances during the past year. In November 2009, for instance, the Internet Crime Complaint Center released an Intelligence Note claiming the Federal Bureau of Investigation (FBI) had witnessed a surge in ACH fraud involving the capturing of businesses' online banking credentials. The FBI estimated these activities had resulted in more than $100 million in fraud.

Commercial banking accounts have become especially popular targets for cyber criminals because the large numbers of transactions that occur make it easier to hide fraudulent ones. Businesses often also check their account activity less frequently than consumers, giving criminals more time to strike.

Financial criminals often "test the water" to see if banks or businesses are watching accounts by transferring small amounts of cash or phishing for account holder information to detect the vulnerability of an institution's online banking system. Once they feel their actions are going unnoticed, criminals will conduct much larger attacks.

One recent example includes a Texas-based machinery company that brought suit against their bank. Criminals outside of the U.S. were able to siphon more than $800,000 from the company's commercial bank account via ACH and wire transfers. While the bank was able to retrieve about $600,000 of the lost funds, the company demanded it be reimbursed for the remainder, claiming the bank should have identified and prevented the irregular, fraudulent transactions from occurring.

A lawsuit was settled out of court, but it's evident from this example that banks do need to sweat the small stuff to avoid larger instances of fraud and the legal, financial and reputational ramifications that accompany it. Petty financial crimes often lead to much more elaborate fraudulent schemes. Preventing smaller crimes is a very effective way to reduce chances of the larger ones occurring and the devastating losses that typically result.

Banks can bolster their financial crime control programs using a crime fighting methodology that establishes their own "police-like" presence via an automated sentry. An anti-fraud technology solution that provides real-time surveillance can help banks identify "broken windows," or the electronic warning signs that typically precede a larger attack. It can also send a message to criminals that suspicious activity is being monitored, enforcement is underway and perpetrators will be pursued.

Like police foot patrols, a real-time enabled solution can help a bank keep watch over its entire account base for irregular activity-monitoring employees, customers and their accounts and flagging any suspicious behavior for investigation before crimes can occur. Common precursors to fraudulent activity include excessive account inquiries, the probing of account credentials, violations of login policies, and the exploitation of dormant accounts. As fraudulent activity often involves collusion between employees and outsiders, the constant presence of an automated sentry can allow banks to disrupt such behavior quickly.

Similar to police departments that track and target crime hot spots in certain neighborhoods, banks can also identify business lines and account profiles that are more susceptible to fraudulent activity. An anti-fraud solution can help a bank assess potential problem areas.

Finally, an automated anti-fraud solution can send a strong signal to criminals that they will be apprehended if they choose to target the bank. In fact, most criminologists agree that a watchful eye is the most effective deterrent to crime. When a financial crime does occur, however, an anti-fraud solution can help ensure a criminal is caught. Good solutions collect and preserve forensic evidence to support timely action and facilitate prosecution.

Over time, bank investigators can also build a history of normal behavior patterns and statistical profiles so that the anti-fraud system becomes highly attuned to the precursors of financial crime. The bank is then able to repair any broken windows and assure customers and other stakeholders- as well as criminals-it is a place where order is maintained and financial crime is kept at bay.


Tom Leuchtner is director of Financial Crime Control Solutions for Wolters Kluwer Financial Services.

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