Featurespace, the leading provider of enterprise financial crime prevention software, released a recent report, “The State of Fraud and Financial Crime in the U.S.” stating that financial sector is trapped between a rock and a hard place with the increase in financial crime and the complexity of implementing a solution. The report found that 62% of all Financial Institutions (FI) have experienced an increase in the volume of financial attacks, with smaller FIs (those with between $5B and $25B in assets) experiencing a greater increase.
Carolyn Homberger, President of the Americas for Featurespace, said: “This research points to an industry in a kind of deadlock when it comes to combating fraud and financial crime. The data, alongside our own experience, shows there’s an appetite for more innovative solutions able to address the ever-increasing challenges posed, yet it appears some institutions continue to wait before taking the lead and benefiting from the significantly reduced fraud losses promised to smart thinking, first movers. It’s a paradox that benefits no one as much as the criminal, and impacts no-one as much as the consumer who see their confidence, trust and choice diminished further with every attack.”
Homberger went on to discuss the need for collaboration between leadership across various business sectors in order for banks to become more effective at combating modern fraud tactics.
“Like any business, banks can be siloed organizations,” Homberger said. “Leaders across fraud prevention, anti-money laundering (AML), and data science must continue to collaborate to create long-term fraud prevention plans that are custom to each bank. There is no one-size-fits-all approach to fraud, and a diverse array of perspectives are needed in order to create an effective strategy.”
The research showed that a majority of FIs saw criminals’ increasing use of sophisticated methods to target their organizations and their clients as a significant problem in their efforts to fight financial crime. Approximately 25% of the largest FIs by asset size consider this to be the most important challenge they face, leading all others.
Financial Institutions are hindered with complexity or compliance fears. The report found that two out of three executives viewed the adoption of innovative solutions to improve fraud detection and anti-money laundering compliance as a high priority, but 39% questioned cited concerns about the perceived complexity of integrating new technologies into their organizations.
Dave Excell, Featurespace’s Founder, said: “This report raises some important questions around how fraud and financial crime is measured and reported across the US, and makes us ask why some executives feel restricted in implementing effective countermeasures.
“We recognize the report is the first of its kind and the data is limited; however, what’s clear is that traditional approaches to curbing fraud and financial crime are no longer enough to stem the tide. Fears of compliance or technology complexity appear to be holding institutions back from employing more effective machine learning, fraud detection platforms that are simple, battle tested, and better equipped to minimize institutional losses.”
The report also found FIs that employ machine learning, artificial intelligence or cloud-based platforms to mitigate fraud risk had the smallest shares of transactions lead to fraud losses among respondents to the survey. Overcoming implementation challenges can thus make a sizable impact in overall fraud-fighting effectiveness.
“Our hope is that this report opens up an industry wide conversation, and future iterations will build a deeper understanding of the challenges we face, and what we must do collectively to outsmart the criminal. The one thing we can’t do is nothing,” Excell said.
A note to readers:
Featurespace’s report polled 200 executives working at Financial Institutions with at least $5 billion in assets to gather holistic view of key fraud trends and financial crime prevention measures that exist today. Given that there is no single, authoritative source of data, the report serves to fill the gap, and provide the industry with a baseline for benchmarking and decision making. Ultimately, the purpose of this work is to start a conversation that promotes debate, discussion and knowledge sharing across the sector.
View source version on businesswire.com here.
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