In 2023, the Canadian Anti-Fraud Centre reported a staggering $554 million in victim losses related to fraud and cybercrime — nearly 5 per cent more than what was reported in 2022, which in itself was a 40% increase from 2021.
The landscape of fraud prevention is constantly evolving to keep up with fraudsters’ ever-changing tactics. As financial institutions transition to faster payments systems and real-time functionality, they must also adopt new technologies and strategies
to effectively mitigate the increasing fraud risk so many Canadians are experiencing.
As for small financial institution, they face risk of heightened vulnerabilities like fewer staff compared to larger organizations, and likely have limited (if any) dedicated staff focused on fraud prevention. Technology limitations due to costs, reduced
compliance resources and limited IT resources to manage large installations or integrations are also likely challenges you face in this space.
Despite these challenges, there are several things small financial institutions can do to effectively protect their operations and maintain members and customers trust — things that small financial institutions probably are best at like leveraging their
strong customer relationships and capitalizing on agility.
How small financial institutions can prioritize fraud with limited resources
Prioritize fraud and scam prevention through education
Customer education and employee training are some of the simplest and most effective ways to mitigate potential financial losses. With scams like grandparent scams, cryptocurrency investment scams and romance scams on the rise, it becomes crucial for both
customers and employees to be well-informed about these tactics and adopt basic security practices to thwart them. Training sessions that cover secure password best practices and real-life examples of scam tactics can go a long way in increasing knowledge
and reducing the likelihood of customers and employees exposing themselves to fraud risk.
Establish an efficient governance model
Don’t neglect standard policies and procedures that are simple and easy. This drives consistent compliance with fraud prevention protocols across your organization. Commitment from the organization and executive, and creating the right culture is very effective
as a foundational approach.
Foster collaborative partnerships
Exploring partnerships with industry associations and thought leader organizations can be beneficial. Partnerships can give you the opportunity to share resources, expertise, and advanced technologies, which help build up your fraud prevention capabilities.
Looking for creative approaches to meeting compliance requirements as well as technology and resource needs will potentially reduce costs and increase net benefits.
Leverage agility for quicker response
Small financial institutions’ inherent agility can help develop tailored approaches to address fraud challenges. For example, small financial institutions can pivot quickly to adapt to emerging threats and being better prepared to change course when necessary.
Using their robust but simplified governance structure, and leveraging partnerships, small businesses can realize advantages over larger organizations.
Watch the digital door with new technology
Passwords are one of the most common targets for fraudsters. Strengthening password security demands robust authentication methods, risk-based measures and behavioural analysis to detect anomalies.
Active exploration of innovations like Passwordless Login, based on the robust Fast Identity Online 2 (FIDO2) standards developed by the FIDO Alliance, is essential to bolster online security and authentication.
In addition to password-related measures, it’s crucial to implement continuous authentication techniques, including transaction step-up and behavioral biometrics, which analyze user interactions with devices such as keyboards, mice, and fingerprints. These
technologies collectively ensure both secure and seamless user identification processes.
It’s imperative for financial institutions, especially smaller ones, to adapt and fortify their defenses. Despite resource constraints, they can prioritize fraud prevention through efficient governance, customer education, strategic partnerships, agility,
and advanced technologies. This proactive approach safeguards their operations, upholds trust, and ensures resilience in the face of dynamic fraud threats.
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- Source: https://www.finextra.com/blogposting/25769/mitigating-fraud-risk–effective-strategies-for-small-financial-institutions?utm_medium=rssfinextra&utm_source=finextrablogs
