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Wire Transfer Fraud who is Responsible

I recently wrote about the risks that banks face with respect to the alarming scale and sophistication of today's wire transfers. Related to this is the issue of acccountability and responsibility.

While mitigating risk is both the financial institution's AND the customer's responsibility, it is often the customer authentication measures which fall short and opens up the point of penetration/attack. On their end, however, financial institutions are beginning to push the boundaries and implementing advanced technologies to provide predictive and early warning alerts to mitigate wire and ACH fraud.

With wire and ACH fraud, financial institutions are not only vulnerable to high-value fraud, but also to multiple points of loss across a corporate customers' account. Once "in" criminals are able to access and undermine the systems across the financial enterprise channel -- from wire transfer through corporate checking accounts, to CDs and corporate cards. To combat this, financial services companies are increasingly looking to electronic payment systems companies to provide sophisticated systems that deliver a combination of predictive analytics and user-defined rules to stop fraudulent activity. This form of software solution proactively manages and mitigates risk by monitoring and identifying changes in customer behavior patterns across the ecosystem of financial services products to cut off cross-channel fraud in real time. It also helps a financial institution's fraud operations rapidly recognize attacks from schemes such as identity theft, ACH kiting, skimming, account takeover and money laundering. By using an advanced fraud detection system that analyzes wire transfer transactions in real- and near-real time, financial institutions can augment current processes and resources to screen for high-risk activity and take action -- even before the money leaves the bank.

Monitoring ACH and wire activity not only mitigates financial risk by reducing overall fraud loss, it also mitigates reputational risk in terms of protecting the financial institution's brand equity, customer loyalty and customer satisfaction. So, while protecting against wire and ACH fraud is both the bank and corporate customers' responsibility -- arguably it is the financial institution that "risks" the most. Given this, banks and their partners should take protective measures and implement intelligent, customer-centric risk management solutions to cut the cords of wire and ACH fraud.

Cleber A. Martins

Business solutions analyst for Risk Management Solutions at ACI Worldwide