Mauriceo Castanheiro, Fraud Industry Expert, Verafin

Below is an insight into what can be expected from Mauriceo’s session at Fraud and Financial Crime Europe 2023.

The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.

How can consortium data and analytics help financial institutions identify APP fraud?

APP scams involve persuading a victim to transfer funds to someone they believe is a genuine payee but is really a fraudster or a mule. This trick exploits the fact that most financial institutions lack the visibility they need beyond their own institution to identify the payment as risky. With consortium data and analytics, financial institutions gain insight into the payer and payee in a transaction. Payments involving known accounts with ahistory of legitimate activity across the consortium are analyzed as lower risk, while transactions involving unrecognized accounts are analyzed as higher risk. This allows an institution to detect potentially suspicious payments effectively and allow legitimate transfers to proceed uninterrupted.

How can financial institutions utilize cross-channel analytics to uncover fraudulent activity?

Fraudsters do not limit their activity to only one channel. As we often see, a single bad actor might commit wire fraud, faster payment fraud, and check fraud simultaneously in an attempt to exploit the siloes between departments at a financial institution. Cross-channel analytics provide a holistic view of customers’ activities and relationships across multiple payment channels for more effective detection of suspicious activity distributed across several payment types.

Cross-channel analytics are even more powerful when used in concert with a consortium approach. Profiling accounts across multiple payment channels, such as wire and faster payments, and using these profiles together in the analysis allows for even greater fraud prevention than if profiles for each channel were considered in isolation.

Why should financial institutions profile payees across a network of international banks?

Profiling payees across a network of international banks offers numerous benefits to financial institutions. These institutions’ size and global reach equate to an even greater number of accounts that can be profiled by consortium analytics, further strengthening the advantages of this approach for fraud prevention, false positive reduction, and more.

Secondly, fraudsters do not obey boundaries or the rule of law. They operate domestically and internationally — having a global view and being able to holistically consider international transactions provides even greater coverage against fraud, further reducing reputational risk and losses.

In what ways can financial institutions identify risky counterparties such as money mules?

In a consortium approach, accounts are profiled on a massive scale, allowing money mules to be detected more effectively. Transactions involving unrecognized accounts are analyzed as higher risk, allowing interdict and investigation with precision to uncover mules or other accounts opened to facilitate fraud. As financial institutions across the consortium identify payments as fraudulent, suspected mule accounts can be included in any future analysis, ensuring institutions who are members of the consortium are not sending payments to suspected money mules. Consortium members can also be alerted when another institution within the consortium blocks a fraudulent payment destined for their institution — indicating the presence of a potential mule account within their customer base.

How can financial institutions look to reduce blocked transactions and false positives?

A consortium approach provides a complete picture of risk across the entirety of a transaction, and this allows financial institutions to not only improve their fraud detection but also reduce false positives and blocked transactions. More effective detection of high-risk payments means institutions are alerted when a payment is truly suspicious and requires interdiction. Meanwhile, payments involving known accounts with a history of legitimate activity across the consortium are analyzed as lower risk — financial institutions can allow these transfers to proceed uninterrupted. Together, this translates into fewer false positives and allows for fewer blocked transactions and unnecessary callbacks.