Financial institutions

Banks and financial institutions struggle to cope with rising incidents of fraud: Deloitte survey

In the wake of COVID-19 and new digital operations, banking and financial institutions are struggling to cope with an increasing number of fraud incidents and the trend is expected to continue, according to a Deloitte India survey on Monday. The main reasons identified for the increase in fraud incidents over the next two years include large-scale remote working models, the increase in the number of customers using banking channels other than branches and the limited use/ ineffective forensic analysis tools to identify potential red flags, Deloitte Touche Tohmatsu India LLP (DTTL) said in a statement.

About the survey, Deloitte said it collected the views of 70 key C-suite stakeholders/senior executives responsible for compliance and fraud risk management, audit/finance, asset recovery from various financial institutions based in India. The banks and financial institutions that participated in the survey included private, public, foreign, cooperative and regional rural banks in India.

“In the wake of COVID-19 and new digital operations, banking and financial institutions are struggling to cope with an increasing number of fraud incidents,” said the Deloitte India Banking Fraud Survey, adding that “ this trend is expected to continue, with 78 percent of respondents saying that fraud could increase over the next two years.”

According to survey results, retail banking was identified as a major contributor to fraud incidents, with 53% of respondents indicating that they had experienced more than 100 fraud incidents (in the last two years) – an increase of 29 % from the previous one. editing.

Similarly, the non-commercial segment experienced an average of 20 incidents of fraud, highlighted by 56% of survey respondents – again, a 22% increase.

“In addition, data theft, cybercrime, third-party induced fraud, bribery and corruption, and fraudulent documentation were identified as the top five concerns, with over 42% of respondents (cumulative) claiming to be victims,” ​​the statement read. noted.

Survey respondents indicated that the top three results of COVID-19 on their Fraud Risk Management (FRM) function would be an increased reliance on analytics tools for fraud monitoring and detection (25%) , the need to educate customers and employees about fraud. (23%) and a change to the target operating model to improve remote FRM capabilities (21%).

Speaking at the launch of the survey results, KV Karthik, Partner, Financial Advisory, Deloitte India, said the impact of the pandemic has meant that institutions around the world are operating in an entirely new environment.

“The increase in the use of digital channels for transactions by customers, on the one hand, has contributed to the ease and speed of transactions. On the other hand, with scalable and complex business models and use technology, existing fraud risk management frameworks have been introduced to new and more complex challenges,” he said.

Nishkam Ojha, Partner, Deloitte India, felt that the pandemic has forced banks to adopt significant organizational and operational changes in a short period of time to avoid service disruptions.

“With myriad changes being rolled out upstream, but processes and systems possibly remaining intact, the question arises as to whether all of these changes have been assessed for vulnerability to fraud,” he added. .

Only half of survey respondents said they conduct fraud risk assessments and update their fraud risk register once a year.

Fraud risks such as fraudulent loans (24%), mobile/internet banking fraud (14%), identity/data theft (13%) and phishing (9%) identified as the top four concerns facing banks today, the frequency of fraud risk assessment leaves much to be desired.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (DTTL), its network of member firms and their related entities.