Using operational risk frameworks for managing fraud risk

Article

The evolution of fraud risk management have been working in fraud for the past 15 years. Some things have hardly changed (for example, we still see BIN attacks in card fraud) but others are now unrecognizable (identification and verification used to be your mother’s maiden name and the details printed on your payment card). However, how fraud is managed within financial institutions (FIs) has evolved significantly. Risk management has changed, technology has changed, FI priorities have changed (it is no longer just about losses), and there is something called “customer experience” now. Personally, have found it a fascinating journey. It has become a hugely challenging and rewarding profession, particularly when you overlay the changes in how fraud should be managed as an operational and financial crime risk. Fraud managers are now accountants and data analysts; they need to understand legal terminology for regulations such as PSD2, advocates or customers, they are often asked to understand technology “stacks”, and be operating model experts.Today, the evolution of fraud management is entering a new phase, with the convergence of financial crime risk types. This development has manifested itself in various ways across the industry; for example, my role as Head of Fraud sits within the financial crime compliance department, which in turn manages all financial crime risks together. This evolution is driving institutions to work on the synergies between these risk areas, and the term “FRAML” (love it or hate it) is now commonplace in• Fraud teams can then show their business stakeholders what type of impact these risks might have (through inherent risk assessments) manager can assess their performance, and can see details of all the elements that contribute to managing fraud. financial crime strategy discussions. If you look at the UK, pending legislation focusing on money-mule accounts by the payment services regulator (and the associated financial liabilities), will f