As fraud continues to morph daily, its current state is forever growing and expanding. In regards to international payments fraud, we have seen a hurricane of new scams and avenues for carrying out those frauds hit the global economy. Why are we seeing this dramatic increase in international payments fraud? Because, as the cyber world continues to increase and interconnect people from across the global, fraud will continue to plague those countries in which most of the world’s wealth thrives such as the United States.
International payments fraud can come in many forms to include ACH, check, credit cards, and wire transfers. However, the most recent fraud scam afflicting financial institutions is RDC fraud, remote deposit capture, which is the process of taking a picture of a check on your smartphone and having it deposited into your bank account. The fraud that surrounds RDC is that scammers are out setting up multiple bank accounts with different financial institutions in an effort to deposit the same check multiple times.
Check fraud feeds right back into RDC fraud. Imagine someone overseas producing counterfeit checks with your banking information. RDC eliminates the need for the fraudster to take that check to the bank and deposit it and possibly get caught with a counterfeit. RDC fraudsters move so quickly that most of the time they set up a bank account, obtain the money from the check using RDC software and then withdraw the money and close the account before any fraudulent activity can be detected.
So first, what can financial institutions do to protect themselves against international check fraud? There are many different new technologies available to financial institutions that offer fraud detection. Biometric identification can be useful in the case where the fraudster tries to forge your signature on checks. Banking customers are asked to sign a paper document against a flat pad using an electronic pen that will sense the pattern, speed, and pressure used to create the signature. Utilizing this technology, forgeries can be detected immediately.
Of special note, the Financial Crime Enforcement Network (FinCEN) recently reported that it saw a 7.5 percent drop from 2010 in the number of check fraud cases throughout the financial industry. This drop can be linked back to the trend of the slow disappearance of checks. With the decline of check fraud cases, there has been a sharp increase in the number of debit card fraud cases. However, is it important to note that the number of debit card frauds is still significantly lower than check fraud.
What about RDC fraud? Financial institutions can safeguard themselves against RDC fraud by only offering the services to low risk customers. Customer screening is the most effective approach to preventing RDC fraud. RDC should not be offered across the board and US banks should consider not offering RDC services to international customers. In addition, financial institutions should consider commercial insurance coverage to protect from liability in the event there are problems with RDC services.
Protecting financial institutions against ACH fraud can be as simple as leaving it in the hands of the customer. The best way to stop ACH fraud is to allow customers who often use the electronic transfer of funds system to set up an approved list of authorized ACH originators. Anything that hasn’t been pre-authorized by the customer automatically gets rejected. Another way to combat ACH fraud is to have customers approve all ACH activity before it is posted and withdrawn from the account.
International credit card fraud can be combatted by financial institutions by investing in automated systems that will detect fraudulent activity. Artificial intelligence systems can quickly gather spending patterns about a customer, create a profile for that person, and can pinpoint unusual transactions flagging it before it’s processed for payment. Most consumers are familiar with this practice when traveling. We’ve all been out of town, received a phone call from our credit company asking if we’re in a certain location when they see multiple transactions coming from an area in which you don’t reside.
International wire transfer fraud has been a hot topic as of late. With numerous consumers falling prey to international con artists, financial institutions can help to stop the international fraudster in his tracks by tracking customer behavior, just like credit card companies do. By building a profile of your customer, financial institutions can easily detect something is awry. Financial institutions that allow wire transfers to take place online might consider removing that option. Institutions open up a whole new can of worms by allows wire transfers to take place online because skillful fraudsters can bypass authentication measures.
In a nutshell, financial institutions can prevent international payments fraud best by employing sophisticated systems that detect fraud immediately. Investing in these systems does not only protect the consumer but they ultimately protect the financial institution and make the institution one in which customers want backing their money. Linda Webb aka The Fraud Dog, leading fraud expert belives that putting money into fraud programs and cutting edge technology is the most reliable and efficient way for financial institutions to safeguard themselves from fraud.
To report potentially fraudulent activity, contact the Fraud Dog at 1-855-FRAUD-DOG.