The Fraud Blog with Tracy Kitten

Integrated AML, Fraud Tools Make Sense

Detection Should be Integrated, Starting with Solutions
Integrated AML, Fraud Tools Make Sense

Industry experts tell me it's clear we're at a fraud tipping point in the U.S. What we need, they say, are more enhanced channel integration, stronger anti-money-laundering practices and more secure card technology.

Over the summer, a study from Deloitte found that data management and integration would be keys to meeting new financial regulatory mandates regarding fraud prevention. "The challenges of information provision are significant," the report says. "However, integrating data across an organization can also yield significant benefits in the form of lower finance costs, more effective capital management, and more informed strategic management of business portfolios."

But the report also notes that regulators realize gathering meaningful information from legacy and siloed channels will be an ongoing challenge for the financial industry.

According to our own survey, The Faces of Fraud, a lack of resources and technology is to blame. Most institutions continue to rely on manual fraud detection, our survey finds, with 55 percent of respondents saying they continue to rely on manual reports for fraud detection. Only 16 percent say they use tools detect cross-channel patterns. And 40 percent say current anti-fraud technologies fail to detect cross-channel patterns.

George Tubin, a senior research director for TowerGroup who focuses on delivery channels and financial security, says "Tying these things together is incredibly difficult" and "most institutions don't really have the resources or capabilities to do it."

And, as Matthew Speare of M&T Bank Corp. says in a panel discussion included in our Faces of Fraud Survey webinar, fraud detection is "still an afterthought."

"No one seems to have been able to have made a lot of traction, and no one seems to be doing a lot to detect multichannel fraud," he says.

True Channel Integration?

Attaining true channel integration will no doubt require big investments, and that's going to require some baby steps. Most institutions aren't in a position to do all of it at once.

So, as we look into 2011, what is going to help banks and credit unions attain the levels of fraud prevention they need?

One of the most interesting perspectives I've heard in recent weeks came from Doug Johnson of the American Bankers Association. Johnson says banking institutions need to make wiser technology investments -- not more of them. What the industry needs are tools that are better integrated from the vendor community. And when it comes to anti-money-laundering solutions, he says, integration is a no-brainer. So why not tie AML and fraud-detection?

That makes sense.

"Generally, the money-laundering applications are in batch form," he says. But that doesn't help banks know or see in real-time when an unauthorized or suspicious ACH transaction comes through.

"There is an expectation, I think, going forward that those fraud-detection and anti-money-laundering products are going to be better integrated. It gives senior management a better value proposition," Johnson says. "Now those anti-money-laundering tools are not just some cost; they actually add dollars to the bottom line because, essentially, you are deterring fraud." So, perhaps we should be looking to the vendors as well as to the banks. Times are changing, the vendor landscape is evolving, and I do see more third-party providers offering enterprise-wide solutions.

Tying AML to channel integration makes sense to me, and it's one less tool or package for which a bank or credit union will have to fork out funds. But pressure on the vendors will have to come from the top; and that requires not only buy-in, but a better understanding about fraud-detection from bank executives and leaders.

About the Author

Tracy Kitten

Tracy Kitten

Former Director of Global Events Content and Executive Editor, BankInfoSecurity & CUInfoSecurity

Kitten was director of global events content and an executive editor at ISMG. A veteran journalist with more than 20 years of experience, she covered the financial sector for over 10 years. Before joining Information Security Media Group in 2010, she covered the financial self-service industry as the senior editor of ATMmarketplace, part of Networld Media. Kitten has been a regular speaker at domestic and international conferences, and was the keynote at ATMIA's U.S. and Canadian conferences in 2009. She has been quoted by, ABC News, and MSN Money.

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