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78% of BFSI firms believe frauds could increase in next 2 years: Deloitte survey

Key reasons for rising fraud incidents include large-scale remote working models, increase in customers using non-branch banking channels, and the limited/ineffective use of forensic tools to identify potential red flags. (Photo: iStock)Premium
Key reasons for rising fraud incidents include large-scale remote working models, increase in customers using non-branch banking channels, and the limited/ineffective use of forensic tools to identify potential red flags. (Photo: iStock)

  • While increased use of digital channels for transactions by customers has contributed to ease and speed of transactions, evolving and complex business models and increased use of technology have introduced newer and more complex challenges to existing fraud risk management frameworks 

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BENGALURU: As banking and financial institutions struggle to deal with rising number of frauds, about 78% believe such incidents could increase over the next two years, according to the findings of the fourth edition of the Deloitte India Banking Fraud Survey.

Key reasons for rising fraud incidents include large-scale remote working models, increase in customers using non-branch banking channels, and the limited/ineffective use of forensic tools to identify potential red flags.

Retail banking was identified as a major contributor to frauds, with 53% respondents of the survey indicating that they had experienced more than 100 such incidents over the last two years, a 29% increase since the previous edition. Similarly, the non-retail segment saw an average of 20 fraud incidents, as highlighted by 56% of survey respondents, a rise from the previous 22%.

Additionally, data theft, cybercrime, third-party-induced fraud, bribery and corruption, and fraudulent documentation have been identified as the top five concerns with over 42% of respondents (cumulative) reporting to be victims of these.

"The impact of the pandemic has resulted in institutions across the globe operating in an entirely new environment. Increase in the use of digital channels for transactions by customers, on one hand, has contributed to the ease and speed of transactions. On the other, with evolving and complex business models and increased use of technology, existing fraud risk management frameworks have been introduced to newer and more complex challenges," said K.V. Karthik, partner, Financial Advisory, Deloitte India.

Survey respondents indicated that the top three outcomes of Covid-19 on their Fraud Risk Management (FRM) function will be increased dependence on analytical tools for fraud monitoring and detection (25%), the need to create awareness about fraud among customers and employees (23%), and a change in the target operating model to enhance capabilities of remote FRM function (21%).

Survey respondents said areas such as KYC/anti-money laundering (21%), fraud risk assessment (17%), and fraud detection (15%) would benefit from deploying AI/ML technology. 

"The use of advanced technologies such as AI/ML can analyse large amounts of data, filter out false alerts, and identify connections and patterns that are too complex to be picked up by straightforward, rule-based monitoring, or the human eye. This will position financial institutions to respond faster/better and cope with future economic crises with resilience," the report said.

 

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