Joining the Dots: Developing a Coordinated, Strategic Approach to Fraud and Financial Crime

Fraud and financial crime are on the rise, and financial services institutions have to balance their efforts to manage this risk with their need to provide high levels of service to a demanding customer base.

In the digital age, the implications of fraud and financial crime perpetrated against financial services organizations and their customers have become ever more significant. Organized crime, global terrorism, and new and ever-changing types of fraud—in addition to increased regulatory requirements—have led financial services organizations to pursue new techniques for preventing and detecting illegal activity. Accenture identifies three basic principles that underlie successful fraud detection.

Fraud is on the increase in most markets. In the United States, for instance, fraud losses on credit, debit and prepaid cards hit $6.89 billion in 2009, up seven percent from 2008. The same trends are apparent elsewhere in the world.

The business case for stronger efforts to fight fraud and financial crime is strong. The financial and reputational risks from fraud have increased at a time when financial firms are focusing on much-needed cost-cutting, and also when increased regulatory scrutiny is forcing a rethink on the organization’s risk profile.

At the same time, efforts to address fraud and financial crime have to be weighed against the need to deliver appropriate levels of client service—a must for high performance in an era characterized by clients who are less loyal and more demanding.

Where financial firms once saw fraud as a business cost, the increasing sophistication of fraudsters means that a more proactive approach is necessary. Banks themselves are now collaborating to help each other outwit crime syndicates that are increasingly effective—and bold.

Common varieties of financial fraud include:

• Application fraud
• Online banking
• Check fraud
• Account takeover fraud
• Mobile phone fraud
• Staff fraud

In addition, financial organizations must be increasingly concerned about money laundering, which presents its own set of processes and detection challenges.

In Accenture’s work to help financial institutions fight fraud as part of an overall strategy to achieve high performance, we have identified three principles that serve as a foundation for fraud prevention and detection: 

• Anti-fraud activities should be centralized within the organization.
• The relationship between customer experience, fraud prevention and detection, risk management and cost reduction should be strengthened.
• Fraud systems, technologies and tools should be layered to increase efficiency in fraud detection.

Accenture research indicates that financial services organizations’ own assessments of their ability to detect and prevent fraud vary widely. Self-confidence in this area is closely tied to having a centralized person or function with responsibility for the management of financial crime.

Steve Culp is the managing director-Accenture Risk Management. Based in London, he has 20 years of global experience in strategy definition, risk management, enterprise performance management and delivering large scale finance operations engagements. Prior to his current role, Steve was the global lead for Accenture’s Finance & Performance Management consulting services for global banking, insurance and capital markets institutions. With his extensive risk management and performance management experience and business acumen, he guides executives and their teams on the journey to becoming high-performance businesses.

Chris Thompson is executive director-Risk Management, Banking and Capital Markets, North America, and is based in New York. Specializing in complex, large-scale finance and risk programs, he works with some of the world’s leading retail, commercial and investment banks. Chris brings his nearly 20 years of broad-based experience in financial architectures, risk management, performance management and trading to organizations determined to become high-performance businesses.

Heather Adams leads Accenture United Kingdom’s Fraud and Financial Crime Group within the Risk Management practice. She has extensive experience in consulting to financial services clients and delivering process, organizational and technology change. She has worked with senior leaders to define their fraud and financial crime strategy and has deep functional expertise in fraud, AML, client account opening and customer data. She is skilled in project and program management for global change programs, and has experience  working with operations, credit risk, compliance, legal, front office and technology functions to deliver strategic change.