To counter the rising prevalence of financial fraud, companies that offer financial services need to build a robust security infrastructure. Since they are the prime target of cybercriminals, having the necessary policies, processes, and systems ensures protection for both the company and its clients.
If you’re currently managing a bank or a financial institution, you cannot afford to be neglectful with cybersecurity. Criminals are always on the lookout for ways to profit off negligence, so staying proactive with your company’s safety is an absolute must. Start by learning the many faces of banking fraud and the different protection strategies at your disposal.
What is Banking Fraud?
Banking fraud is when a fraudster uses illegal methods to obtain the assets, finances, or resources of a financial institution. Since criminals require money to fund their malicious schemes, they may resort to creating fake identities or phishing to steal from banks. Unfortunately, the methods have become increasingly sophisticated in recent years.
7 Types of Banking Fraud
To stay one step ahead of fraudsters, all managers must have a better grasp of the different forms of banking fraud.
1. Phishing – Hackers obtain personal banking information by sending out fake emails or texts that look legitimate. These messages are highly targeted, so someone who falls for this modus may voluntarily give away important banking details such as their credit card number and PIN.
2. Spear Phishing – Consider this as a personalized form of phishing. Hackers may mimic a person your client trusts, such as a representative from your bank, and convinces them to reveal their banking information.
3. Card Payment Fraud – This type of fraud peaked alongside the rise of ecommerce. With the increase in consumers buying from online shops, hackers have devised tactics to steal credit and debit card details to make unauthorized purchases or payments.
4. ATM Fraud or Skimming – Hackers use a small device they can insert into the card slot of merchant payment terminals and ATMs. This skims or copies information from the card that comes into contact with the tampered machine.
5. Spoofing – Cybercriminals design fake websites that look legitimate to undiscerning eyes. These websites collect banking information, which hackers use to carry out fraudulent transactions.
6. Synthetic Identity Fraud – Here, criminals mix and match legitimate and bogus information to come up with a new, synthetic identity. This identity is then used to open new accounts and engage in fraudulent transactions.
6. Money Laundering – Money from illegal activities is useless if not laundered. That’s the only way for “dirty” money to look “clean.” Money laundering has become a huge problem for banking institutions since criminals have come up with clever ways to legitimize assets from questionable sources.
6 Ways to Prevent Banking Fraud
1. Utilize multi-factor authentication (MFA) – Criminals will have a harder time breaking into accounts and systems if they need to bypass multiple authentication layers. As such, applying MFA to all possible areas will significantly decrease the risk of fraud.
2. Use biometric authentication – Compared to other authentication methods, such as passwords and hardware tokens, biometric data cannot be duplicated. Since the unique contours of a face or the inimitable quality of a voice cannot easily be replicated, using biometric authentication will greatly bolster your security.
3. Ensure that all devices are up-to-date – The devices used by your staff can serve as an entry point for hackers. From company computers to personal phones, make sure that all security systems are updated.
4. Conduct periodic risk assessments – As cybercriminals develop new ways to carry out banking fraud, it is important to conduct regular risk assessments. Doing so every few months will help you spot vulnerabilities in your system and allow you to make any necessary changes easily.
5. Educate employees – Gather your employees for fraud awareness sessions. Cybercriminals can easily infiltrate your organization if your staff isn’t trained to spot and manage fraudsters.
6. Optimize your recruitment process – Banking fraud can also stem from an inside job, so make sure your recruitment process is comprehensive. Conduct thorough background checks when hiring a new employee into your organization.
Win the Fight Against Banking Fraud
When dealing with banking fraud, you can’t be meek or tame. Managers must leave no stone unturned since fraudsters will relentlessly try to infiltrate accounts and systems. The good news is you can design and build a security infrastructure that will keep your company and all its stakeholders safe.
Now that you have a better idea of how to deal with banking fraud, you should spot and address vulnerabilities ASAP. If you’re currently looking for multi-factor authentication solutions, we’re here to give you everything you need. Contact Q5id today to learn more!
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