Banks may face increased fraud risks as economic turmoil deepens

Peter Dinham
Wednesday, 25 March 2009 21:32

IT Industry - Deals

A new report released today warns that the state of the global financial services industry, in the current world economic downturn, could increase the risk of potential internal and external fraud attempts in the world’s banks.

The report - “Using Technology to Combat Financial Crime in Retail Banking” – released in London today by market analysis firm, Datamonitor, also says that the increasing amount of overlap and duplication of data, tasks and processes in their anti-fraud and anti-money laundering (AML) divisions is driving banks to seek synergies between compliance, risk management and security.

According to Datamonitor, the current economic crisis exacerbates existing problems which may result in the industry seeing a new wave of financial mis-statements, account manipulations or internal fraud, and, it adds, reduced vigilance could open new windows of opportunity for money launderers and fraudsters.

The report says that as financial crime grows, there is anecdotal evidence that banks are increasingly combining their compliance, fraud, and security departments into one single unit to take care of similar risk areas.
 
Datamonitor expects this approach will result in an emerging trend of standardising business processes and technologies to create an enterprise-wide view of compliance and fraud risk within an institution or across business lines, which can be viewed on management dashboards to keep track of various risks across the enterprise.
 
Jaroslaw Knapik, financial services technology analyst at Datamonitor, says that financial crime is no longer simply about the laundering or theft of money.
 
“It is about high profile issues such as customer data theft, financial misreporting, and many others,” says Knapik, and he further warned that “the extremely severe conditions within the global financial services industry are likely to increase the risk of potential internal and external fraud attempts.”
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