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Winning the face-off against fraud


How the most effective financial institutions are outthinking the bad guys

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Fraud has become pervasive

Fraud is a top-of-mind concern for financial institutions, particularly as electronic banking and payments opened a new and relatively porous channel, which organized crime has exploited in some rather complex and profitable schemes. But some leading institutions have found ways to effectively counter the threat through practical transformation plans supported by emerging technologies related to big data and analytics. This report examines their best practices for fighting fraud, as well as for transforming operations to do so.

Financial crime control is a chief priority for most financial institutions around the world, as they continuously evaluate the best ways to safeguard their systems, their data and, ultimately, their clients. Indeed, fraud and cyber security are on the formal management committee agendas at least quarterly for 80 percent of institutions, according to our recent financial fraud survey.

Our survey of 500 banking and financial markets executives whose responsibilities include fraud prevention was conducted as part of the IBM 2015 Fraud in Financial Institutions Study. Our efforts to identify current capabilities, successes, challenges and best practices in controlling financial crime also included interviews with senior fraud executives from financial institutions and related trade associations around the world. (For more information about the research, see the Study approach and methodology section.)

Underscoring the challenges today’s institutions face in fighting financial crimes, only 56 percent of the executives we surveyed believe their organizations are in reasonable control of fraud threats. And a significant number believe their fraud operations organizations are in need of a substantial overhaul.

Many of the largest institutions, those with total assets greater than USD 300 billion, have transformed or are in the process of transforming their fraud operations. These organizations were successful in developing compelling, multi-factored business cases that emphasize not only the potential to stem direct fraud losses, but also to lower operating costs and – even more important – better engage customers. All of the largest institutions indicated that they were at least in control of the fraud situation, with 52 percent designating their capabilities as a competitive differentiator.

It’s a different story for the smaller institutions, however. A large majority of executives from firms with total assets of USD 100 billion or less identified their organizations’ financial crimes situation as threatened, deteriorating or critical. More than three fourths of the smaller institutions have not undertaken any significant efforts to upgrade their counter financial crimes capabilities recently, while fraud charge-offs as a percentage of revenue were significantly higher for this group. The smaller firms had more trouble justifying a business case and had more difficulty with existing underlying technology in terms of both functional adequacy and their ability to use it effectively.

The good news is that much can be done right now to improve counter fraud and financial crimes performance. Emerging technologies related to analytics, big data and processing speed can help improve the ability to detect and interdict fraud before the money moves. They also can assist in discovering complex cross-channel fraud schemes, such as those organized by international criminal gangs.


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Meet the authors

David Dickson

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, Industrial Products Industry Strategy, Consulting practice


Nicholas Drury, Global Banking and Financial Markets Leader, IBM Institute for Business Value


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