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The multi-faceted threat of fraud

The multi-faceted threat of fraud

KPMG is delighted to share the findings of our inaugural Global Banking Fraud Survey (Survey). The Survey was conducted to obtain a global perspective of how banks are tackling internal and external fraud threats.

The Survey questioned banking fraud risk, investigations and group security professionals on trends in fraud typologies, challenges banks are facing in mitigating internal and external threats in the period 2016 to 2018, security in a digital age and how banks are structuring their teams and deploying resources to optimize their fraud risk management efforts.

KPMG’s Global Banking Survey was conducted between November 2018 and February 2019 across 43 retail banks, 13 of which are in the Asia-Pacific, 5 in the Americas and 25 in Europe, the Middle East and Africa (EMA) region. Eighteen have annual revenues in excess of US$10 billion and 31 employ more than 10,000 people across the globe.

We would like to thank the respondents who took the time to participate in the survey. We are delighted to share the results, accompanied by our own global and regional insights from KPMG member firm professionals.

Key findings from the survey

  • Over half of survey respondents globally experienced increases in both external fraud total value and volume. Increasing fraud typologies globally from 2015 to 2018 include identity theft and account takeover, cyber-attack, card not present fraud and authorized push payments scams.
  • The largest proportion of respondents globally said that the total cost, average cost and volume of internal employee fraud detected stayed the same or decreased. This may not, however, present a true picture of the cost of internal fraud. Many external frauds originate with someone working inside the bank.
  • Over half of respondents recover less than 25 percent of fraud losses; demonstrating that fraud prevention is key. Banks are investing in new technologies, including machine learning real time fraud alerts, voice, facial & fingerprint recognition (biometrics) and profiling how customers interact with their device and internet banking (behavioral biometrics) towards fraud prevention.
  • In every region, banks surveyed considered the most significant challenge in fraud risk to be cyber-attacks. Fraudsters are obtaining customer data through hacking, in social engineering attempts, on the dark web and through criminal networks following data breaches, outside of banks controls.
  • Banks globally are seeing an increasing trend in scams. Fraudsters are manipulating and coercing customers into making payments to them, bypassing bank controls.
  • Customers are key in the prevention and detection of fraudulent activity on their accounts, particularly to reduce scam losses. More should be done to educate customers about fraud and scams.
  • Open Banking is considered a significant challenge in fraud risk by banks, with banks across the globe getting ready to open their doors to third parties to access their customer data. Questions are being raised on the reliance that can be placed on third party controls.

Fraudsters are becoming more sophisticated and can quickly change and adapt their approaches. Banks need to be agile to respond to new threats and embrace new approaches and technologies to predict and prevent fraud.

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