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CAN TECHNICAL INNOVATION HELP FINANCIAL SERVICES FIGHT BACK AGAINST FINANCIAL CRIME?

By Charlie Roberts, Head of Business Development, UK, Ireland & EU at IDnow

 

It’s no secret that the financial services sector is a top target among cyber criminals. In fact, according to a report from IBM, it retained its top spot as the most targeted sector in 2019.

The consequences of falling victim to an attack can be severe too. It can lead to financial losses and reputational damage as well as loss of customer confidence and therefore sales. One UK financial services firm, for example, was hit by a total loss of $87.9 million.

So, if we consider that the coronavirus crisis continues to drive increased online consumer activity, should financial services be more concerned? Simply put, yes.

We are seeing a significant increase in organisations taking their business online to reach their customers. Banks, for example, in adapting to COVID-19, are offering customers a more convenient way of opening an account given branch visiting restrictions. But while these services offer more choice and ease for customers, it also means that new account fraud is opening up and is becoming a major challenge for organisations to overcome.

Charlie Roberts

Some cyber criminals are even trying to exploit the pandemic as an opportunity for financial crime by posing as trusted organisations like banks and even the World Health Organisation. According to Action Fraud, over £6.2 million has reportedly been lost by UK citizens to coronavirus-related scams. And this figure continues to rise week by week.

 

The role of innovation

The rise in financial crime shows just how much the financial services sector is in need of technological innovation. We’ve already seen great progress. About half of financial services and insurance firms globally already use Artificial Intelligence (AI), according to Forrester.

It has many use cases too. In a recent report published by The Alan Turing Institute, AI is largely being used for fraud detection and compliance. AI is beneficial because its algorithms can analyse millions of data points to detect fraudulent transactions which could otherwise go unnoticed by humans. What’s more, these AI-driven fraud detection systems can now actively learn and calibrate in response to new potential (or real) security threats.

The report also details some of the ways that financial services companies are exploring AI-based fraud prevention alternatives. It includes the use of AI to increase approvals for genuine transactions and the use of real-time and high volume data to help protect schemes, financial institutions and their customers from fraud and financial crime.

It’s perhaps no wonder that, outside of the technology sector, the financial services industry is the biggest spender on AI services according to The Bank of the Future report from Citi. But there is still some way to go in using technology to combat financial crime.

 

The identity verification era

Arguably, identity verification is one of the most important processes that technology can help transform – especially as the current crisis continues to drive increased online customer behaviour. In fact, AI and video based identity verification software can provide financial services organisations with a fast, seamless and secure onboarding process that increases conversion rates and customer satisfaction while providing the highest level of security.

Demand for this software in the UK’s financial services sector has already more than doubled since the start of the year, as growth in scams linked to COVID-19 continue to rise.

It’s this technology that will become critical in validating a person’s identity quickly and confidently while limiting the increased risk of fraud for both businesses and consumers.

IDnow’s AutoIdent is one software solution that has this year been experiencing high demand from the financial services industry. Its AI technology can use the camera on a customer’s smartphone to recognise the country and type of ID document without the need for user input. The technology then captures the machine-readable part of the ID document as well as non-machine-readable areas, such as address fields, before automatically checking the optical security features of the ID documents, such as holograms.

With the subsequent biometric video check of the person and “liveness detection”, the identification process is completed for the customer within just a few steps. The system can then decide if the identification is valid, with a reliability that meets compliance requirements.

 

Fighting back

The threat of financial crime is not going away any time soon and so there is no better way than to fight back with innovation. With the right technology investment, such as in AI identity products, the sector will be in a stronger position to support businesses who have a duty of care to protect their customers from risk of fraud while ensuring they remain resilient during this pandemic.

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Business

ALLIANZ BENELUX IS USING GRAPH TECHNOLOGY TO BEAT FRAUD AND BOOST CUSTOMER-CENTRICITY

Amy Hodler, Director, Analytics and AI Program Manager at Neo4j.

 

Data expert Amy Hodler examines how graph technology is reducing insurance fraud and providing customer insight at one of the world’s largest financial services companies

Financial services firms constantly have to fight financial criminals, but it is getting more demanding for organisations to identify and stop fraudulent activity at the scale it now occurs.

Traditional methods for monitoring fraud, such as setting up rules to examine deviations from normal purchasing patterns, use discrete data. This is useful for catching individual criminals acting alone, but this approach falls short when it comes to detecting fraud rings. Sophisticated criminals continuously alter their strategies to circumvent detection. They utilise synthetic accounts to carry out what appear to be unrelated activities by unconnected individuals. However, these activities are in fact well-coordinated and criminally linked.

The financial services sector needs a better way to follow the trail from one account to another to determine how activities that on the surface appear unrelated are in fact connected. This requires having a 360-degree view of the intricate fraud network to determine how suspicious events are linked.

 

Fraud detection with graphs

Graph database technology may be an invaluable tool in fighting fraud. In contrast to traditional relational databases, graphs not only interpret individual items of data, but also their relationships with one another. An increasing number of the world’s leading financial institutions are using graph databases to model and monitor data about customers, accounts, devices, locations and other attributes to identify fraudulent activity. Allianz, a multinational financial services company offering insurance products and services to 100 million customers in more than 70 countries, is one such.

As a truly customer-centric insurer, Allianz Benelux takes a zero-tolerance stance on fraud. As the subsidiary’s chief data and analytics officer, Sudaman Thoppan Mohanchandralal, explains, “We need to secure customers from risk – not just today, but into the future. We can only do that by having full insight into the risk environment and with an ability to predict it for our customers.”

 

Relational data model problems

Mohanchandralal’s colleague, Dr. Jan Doumen, strategic lead for Customer & Broker Information and Insights, agrees. “The best way to understand your customers and the risks they are exposed to on a daily basis is by storing, analysing and visualising them through connected data.

“Graph technology does this at scale, which means we no longer have to rely only on highly demanding, traditional relational technologies.”

Historically, building internal visualisations of suspicious behaviours with relational technology had been too demanding, Doumen confirms. The latest fraud countermeasures, such as network tracking, were too complex to build in a relational database. Sudaman calls this process a ‘2 by 2’ approach, where SQL database-style tables with rows and columns don’t offer the data connections fraud detection and prevention requires.

Working with a relational data model doesn’t allow the Allianz Benelux team to extract useful data on the fly. In contrast, graph technologies spot potentially fraudulent activity in Allianz Benelux’s ecosystem by disclosing concealed illicit connections. Bringing all the customer data into a graph database permits the Allianz Benelux anti-fraud team to reveal the risk exposures in a motor or household context.

“It is the combination of multi-node, multi-connection snapshots of customers and the much more efficient search possibilities coming from graph technology that we believed would revolutionise the way our internal business handles customers’ risks,” Doumen confirms.

 

Clear business benefit

Equally important for the Allianz Benelux team is having a 360-degree view of the customer. The Belelux operation has gone through a series of mergers and acquisitions and its customer data has become dispersed in separate silos, which has led to a number of operational inefficiencies.

“When we were able to get to a level with graphs to show colleagues this holistic view of a customer, it was so much easier for them to understand rather than through a table with rows and columns. This will enable them to personalise their services towards our customers,” Doumen adds.

Allianz Benelux’s success using the native graph approach has resulted in clear business benefits. Over the course of two years, €2 million of operational profit value was identified. Given the advantages realised with graphs, the Allianz Benelux team plans on offering the solution to other parts of the organisation.

Graph databases can future-proof an organisation’s fraud prevention initiatives by providing insight based on data relationships and connected intelligence. They can also unlock data silos and generate a more unified view of customers – helping you achieve full ‘customer-centricity’, as well as drive more revenue. Sounds well worth investigating.

 

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Business

5 SIMPLE WAYS TO PREVENT A DATA BREACH FROM PUTTING YOUR ACCOUNTANCY PRACTICE OUT OF BUSINESS

By Bruce Penson, Managing Director at Pro Drive IT

 

As an accountancy firm, you hold a huge amount of confidential and sensitive information. Personal details on clients, banking and social security information, confidential material about businesses and their staff: all of this data presents a massive problem.

Why? Because this information is highly valuable to cyber criminals. They know you hold it, they know who you are, and they will be trying to find ways into your IT systems to get access to it. Today’s cyber criminals are no longer hobbyists or ‘geeks’ sitting in a darkened room behind a computer. They are organised gangs with a considerable amount of knowledge and access to more sophisticated IT resources than a typical SME could ever hope to own.

This presents a real problem for accountancy firms — one for which many are inadequately prepared.

There is good news though. It is possible to make very real improvements to your defences and significantly reduce the risk of a breach without the need for complex technical solutions. In this eBook, we are going to cover five simple changes you can make at your accountancy practice to protect it from cyber criminals.

 

  1. Take control of your passwords

With all the different websites and apps we use in both our personal and work lives, we have a lot of passwords to remember. Memorising all of them is an almost-impossible task. Yet with many breaches of firm’s IT systems coming as a result of staff reusing passwords or having easy-to-guess ones, it is an area that accountancy practices cannot afford to ignore.

The UK Government recommends using password managers to address this problem. A password manager stores your valuable passwords in a secure online vault to keep them out of the prying hands of cyber criminals. Our favourite is LastPass, which costs just £3 per user per month for the business version. As well as providing an area for your team to store their passwords, the business edition of LastPass also alerts you to staff storing insecure passwords or reusing them for other websites — ensuring you can maintain best password practice across your firm.

If you are not ready to commit to spending at this stage, LastPass also provides a free of charge service — you can follow our handy guide on how to set this up. There really is no excuse: make sure you setup your password manager today!

 

  1. Switch on two-factor authentication

As we have already discussed, the most common form of data breach comes from passwords being stolen. For web-based accounts and applications, this is a problem as once a cyber criminal has your password and email address, they will also have access to any accounts that use them.

Using automated software, they will quickly find these accounts — meaning they will have gained access before you are even aware you have a problem. At the moment, the most effective way to stop this is to enable two-step authentication. You most likely already use this on your online banking — where you might have to supply a randomly generated code in addition to your password. Most websites and web-based applications will have the option for two-step authentication at no additional cost. Where available, you should ensure this is activated and enforce it for your entire organisation.

This is absolutely essential if you use Microsoft Office 365 or Google Apps. For more information on two-step authentication, view these simple-to-follow guides from the popular two-step authentication app Authy.

 

  1. Use an ‘External Email Banner’

Time and time again, we’ve commented on the fact emails are the source of most cyber security breaches.

As such, it can be very useful to identify any emails you receive that are from outside of your business. If you can do this and you receive an email tagged as being from an ‘external sender’, but it appears to come from a colleague of yours, there is a good chance it is a fraudulent email. Adding a simple banner such as the one below is a very short job for your IT team and should cost you nothing — yet it could save you a fortune.

 

  1. Train Your Staff

It is a well-publicised fact that almost all cyber security breaches require some kind of human interaction to be successful. It is, therefore, somewhat puzzling that the majority of SME accountancy firms do not have a regular cyber security training program in place — especially when you consider that CPD courses and anti-bribery training are deemed so important. Part of the issue is that cyber security training is considered expensive, time consuming to deliver and not at all engaging to the people receiving it. But this is far from true. Some systems cost from as little as £2–3 per member of staff per month and deliver cyber security training in short, digestible blocks. These ‘short and snappy’ training sessions will not take up large amounts of your billable time but will still get the message across in an engaging way.

 

  1. Keep Your Team Aware

One of the challenges in any firm is keeping the threats from cyber security fresh in the minds of your team whilst they have their day jobs to focus on. Although training undoubtedly helps, often this is seen as a ‘point-in-time’ initiative in response to a breach or security incident occurring. Once the memory of this has faded, awareness amongst staff often does too.

The good news is that this is easy to address and even better, it should cost you no more than a little time to administer it. Here is our suggested approach: Nominate a member of staff to be your ‘cyber threat co-ordinator’. This should not necessarily be someone from IT. Ideally, it would be the person involved in running your office and organising staff communications: most likely your practice manager. Your co-ordinator should sign up to some email feeds on the latest threats — a good starting point is the government backed Action Fraud site and the security training service DynaRisk. Your co-ordinator should also review some online blogs such those from the Independent, which offers an easy-to-understand news feed on the latest cyber security threats. The information from these feeds should then be used to create content in staff newsletters, presented regularly in team meetings, posted to your intranet or circulated via email or an instant messaging feed.

 

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