Report Points Finger at Internal Fraud

According to a report published by Celent, insider fraud accounts for approximately 60% of bank fraud cases where a data breach or theft of funds has occurred. Within the financial services industry, insider malicious fraud accounts for a relatively small percentage of all financial services data breaches. From 2005 to 2008 year to date, cumulatively, insider fraud accounted for just 9% of all data breaches. This begs the question of how many incidents are actually communicated to affected customers. Celent estimates that up to 50% of all insider fraud incidents go unreported. Although a fair percentage of incidents are communicated, those that are not communicated in a timely manner are also problematic. This delay poses a substantial risk, as the public backlash can be strong. Incidents that go undetected pose the greatest risk to financial institutions.

Given how serious the consequences of fraud can be, banks have to be quite particular about the policies and procedures they put in place. The breadth and depth of fraud solutions are of the essence, as banks must protect their physical and logical assets. In order to block and prevent potential internal fraud, banks should limit the use and display of social security numbers. They should also set policies regarding the use of personal digital storage (e.g. MP3 players, digital cameras, etc.) at the workplace, in addition to developing and adhering to a sound and timely notification process, and requiring ongoing security awareness and training.

Celent believes that banks need to take internal fraud prevention to the next level. Banks must adopt internal fraud solutions that will allow them to intercept problematic issues before they actually rise to the surface. These solutions can also detect instances of fraud that have been taking place under the bank’s nose for some time. In addition to a dedicated internal fraud solution, banks should consider biometrics, which are, in Celent’s opinion, best suited for internal use at banks.


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