Anti Fraud Strategy in Banking: KYC is One of The Most Important
Online fraud now accounts for a staggering 93% of all banking-related fraud, according to the Financial Crime Report Q2 2021. As the financial industry continues its rapid shift toward digital services, the threat landscape has evolved. This makes anti-fraud banking strategies more critical than ever. Customers expect fast, seamless digital experiences, but this convenience must not come at the cost of security.
To stay ahead of increasingly sophisticated fraud tactics, financial institutions must strike a careful balance between protection and usability. In this article, we will explore proven methods for detecting and preventing digital banking fraud, while minimizing friction, avoiding false positives, and maintaining customer trust.
A Glimpse of Anti Fraud Banking
Anti-fraud banking refers to a set of specialized techniques and processes designed to minimize the risk of fraud. Financial institutions are among the most common targets for fraudsters due to their direct access to funds and their ability to move money quickly.
As such, banks and other financial institutions must continuously innovate and implement strong fraud detection and prevention solutions to protect their assets, systems, and customers.
In general, fraud detection focuses on identifying fraudulent activities or attempts that are happening or have already occurred, while fraud prevention aims to stop these attempts before they begin. In practice, the two strategies go hand in hand and are often used interchangeably, as both are essential to a comprehensive fraud management approach.
Digital Banking Anti-Fraud Strategies
1. Watch for Insider Fraud
To effectively fight fraud, start from within—by thoroughly vetting and auditing your employees. Even trusted staff members may pose a risk. Some insiders have been known to sell customer account information on the dark web.
This isn’t just speculation. A Microsoft investigation found that cybercriminal groups like LAPSUS$ increasingly gain access to their targets by bribing employees. Research published by Clari5 further supports this concern, revealing that 70% of banking fraud cases involve insiders. Clearly, internal fraud monitoring should be a top priority.
2. Educate Your Customers
Raising customer awareness is one of the most reliable ways to reduce fraud risk. Informing users about common threats, what to look out for, and how to transact safely not only reduces vulnerability but also builds trust in your institution.
If you’re investing in customer education, amplify the effort through press releases and media coverage. It not only spreads awareness but also creates free publicity and strengthens your digital bank’s reputation.
3. Monitor Transactions
In many jurisdictions, transaction monitoring is a legal requirement to prevent money laundering and terrorist financing. This includes reporting suspicious activity when anomalies are detected.
However, beyond compliance, actively monitoring how users interact with your digital platforms can provide valuable insights—allowing you to detect and investigate potential fraud early, and even prevent it altogether.
4. Use Real-Time Data Enrichment
As the name suggests, real-time data enrichment enhances your KYC data by adding information from open-source databases, digital services, and even social networks.
This helps you make better risk decisions by giving you a broader understanding of the customer—without asking for extra input from them. With these enriched insights, you can fight fraud without sacrificing a smooth customer experience. In fact, this alternative data can even be used for credit scoring and underwriting, offering a deeper trust signal to identify both high-risk and high-value users.
5. Apply Machine Learning
Fraudsters often attempt to submit fake or manipulated information during KYC checks. However, machine learning algorithms and dynamic risk assessment tools can detect these patterns and flag anomalies in real time.
As fraud tactics evolve, machine learning continuously learns from new data, making it a powerful tool to stay one step ahead.
6. Implement Biometric Systems
Biometric identity verification has become a cornerstone of modern anti-fraud strategies. It’s not only secure but also user-friendly—offering convenience and peace of mind to customers.
Verihubs offers flexible and customizable biometric verification solutions that can be easily integrated into your KYC workflows. Their Biometric Verification product features Face Recognition and Liveness Detection, helping you verify users in real time by scanning their facial features and expressions.
As one of the most reliable biometric technology providers in Southeast Asia, Verihubs has earned the trust of leading companies across the region, offering powerful tools at competitive prices. Contact us to learn more about our high-end technology.
