The Financial Technology Consortium (FSTC) today announced completion of a significant project studying financial transaction fraud across the entire financial services spectrum.
This seven month project resulted in the development of a fraud taxonomy model that can become an important tool in promoting financial institution collaboration in the war on fraud.
The importance of the project was summarized by Brian Kelly, Ernst and Young executive and fraud expert on the twenty member FSTC team. "Responding to threats posed by modern fraud requires unprecedented levels of cooperation and coordination between lines of business, industries, and government agencies. Fraud is growing and getting more serious and sophisticated, providing increased motivation for sharing information to mitigate the risks."
The Fraud Collaboration Project was launched in August of 2007 with goals of: (1) demonstrating the value of collaboration via a shared fraud pattern data base and (2) identifying the infrastructure needed to make use of such a data base on a collaborative basis, practical for financial institutions. The complexity of the project required the team to break into four work groups to complete the massive array of tasks which needed to be performed to achieve the project's goals:
- The first work group researched the legal and regulatory framework, identifying all regulations applying to this area of financial services and flagging those considered most critical. These regulations were summarized and specifics around compliance and reporting and privacy implications were documented.
- Group two surveyed the industry to identify and catalog current fraud prevention capabilities and similar existing initiatives.
- The third work group developed the taxonomy of financial fraud schemes along with a comprehensive glossary of terms, creating a model to be used as common ground to support interactive collaboration within the industry.
- Group four developed an initial concept of operations for sharing of fraud data within the industry to detect, respond and investigate fraud.
"With global fraud losses totaling trillions of dollars, our desire is to bring financial services experts together with technology innovators to simplify collaboration in a very complex environment," states FSTC Managing Executive Jim Pitts. "There is still a lot to be accomplished in this integrated approach to fraud prevention."
The FSTC anticipates extension of the project into a second phase. This next phase will focus on developing more detail around use of the taxonomy, likely to include detailed mapping of prevention technologies available today with the various schemes identified in the initial taxonomy; defining scheme signatures down to the lowest level; identification of cooperative loss reporting alternatives by taxonomy; and how to share real-time information utilizing the taxonomy.