Identity Theft Greatest Emerging Financial Crime Threat

A recent survey conducted by Fortent, an advising firm to financial institutions, found that the greatest fear among financial executives is the growing threat of identity theft.  Fortent reported that 52% of the respondents cited this.

          The study surveyed executives from 30 global, national, and regional financial institutions.  They represented banks based in the United States, as well as overseas,

with asset size ranging from $5 billion to more than $1 trillion.  Among the other crime threats noted by respondents:

“Virtual World” payment systems – 44%
Electronic checking – 40%
Employee fraud – 32%
And, Stored valued cards – 28%

          “The expansion of payment platforms, although good for business, poses new risks on both the regulatory and security fronts,” says Ed Baum, Fortent’s Chief Marketing Officer.  “Our survey reveals that financial institutions are acutely aware that they must respond to these emerging threats.”  This study comes as financial institutions are finalizing their budgets for next year, some wonder how they will tackle the highlighted issues when resources are already stretched.

New payment products – When asked in which areas they expected to see greater regulatory interest over the next five years, 78% cited new payment products, including payment cards, mobile payments, and ‘virtual world’ transactions. 

Retail banking – Still tops compliance officers’ list as a money laundering concern (77%), due primarily to high volumes.  One respondent also explained the pressure to open more accounts: “Branch personnel…are incented to open accounts in volume to meet their goals, but fail to conduct the proper due diligence required.”

• Geographic threats – In identifying particular geographic threats, Eastern Europe (excluding Russia) leads the world as the region that has experienced the biggest increase in suspicious activity related to money laundering, according to respondents.  This region was followed by Russia, Middle East/North Africa, and the rest of Africa.

          In addition, the survey showed that 70% of respondents cited a push to further automate and standardize their systems.  “Staying ahead of criminals is always challenging, and it is even more so in this economy,” says Ed Baum. “But banks know that reducing their exposure to financial crime risk – both from a regulatory and a financial perspective – is essential to staying in business.”