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Banks struggling in fight against insider fraud - study

24 July 2007  |  7432 views  |  0 biometric  eye

Increased staff access to technology, organised crime and poor hiring and screening practices are the main contributors to employee fraud, according to a study of US and UK banks released by anti-fraud outfit Actimize.

The research, which is based on interviews with staff at 40 financial institutions in the US and UK, found that the majority of respondents - 85% - have been affected by employee fraud, while about 65% see the threat becoming more serious in the future.

Furthermore, more than 50% of respondents said that over half of employee fraud incidents occurring at their own institutions are not being detected.

Of those who knew of fraud incidents at their institution, 50% said there had been a case of data theft in the last 12 months. This group's average "largest employee fraud" incident uncovered in the last five years was $874,961, while the single largest theft reported was $6,000,000, says Actimize.

Respondents ranked data availability, general resource priorities and availability of tools as the top three biggest challenges in dealing with the threat of employee fraud. Top challenges relating to managing employee fraud were "limited technology infrastructure" and "understanding the scope of the problem".

But fewer than half of respondents were using automated tools or more sophisticated data mining technology to detect insider fraud, says Actimize.

Commenting on the findings, Amir Orad, EVP and CMO of Actimize, says: "Proper employee fraud detection technology, infrastructure and tools need to be implemented by financial institutions, in addition to proactive screening and reactive investigations."

Last year the UK's Financial Services Authority (FSA) warned that "insider fraud" - through collusion, coercion, infiltration or existing employee action - was one of the most serious fraud threats faced by banks. The watchdog has also repeatedly warned the industry that organised gangs of criminals are infiltrating British banks in order to carry out large-scale frauds.

Earlier this year UK banking group Lloyds TSB said it was installing technology from Actimize at its retail banking division to help detect and prevent potential fraud committed by employees.

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