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A brief overview of different types of fraud affecting financial services firms in Lithuania and elsewhere - this presentation was delivered to ISM students in October, 2014
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A Brief Overview of Financial Fraud
Affecting the Banking Industry in
Lithuania
28th of October, 2014
Disclaimer!
2
# These are my views
# They do not necessarily reflect the policies or views of my current or former employers
# The main purpose is to share ideas and promote discussion
A few bits about myself
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Regional Manager of Security
Main responsibilities:
• Health and Safety
• Robbery prevention
• Drive offs
• Shop theft
• Staff fraud
• Violence against staff
• Investigation of security incidents
• Liaison with the police
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A few bits about myself (cont’d)
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Regional Director of Security
Main responsibilities:
# Counter fraud and counter corruption
# Physical security
# Fraud risk assessments
# Internal/external investigations
# Training of staff
# Liaison with law enforcement
# Liaison with other financial institutions
Academic achievements
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What do you know
about fraud in the
financial services
industry?
Common Elements of Fraud
# Dishonesty
# Fraudulent intentions
# Fraud by false representation
# Fraud by failing to disclose information
# Fraud by abuse of position
The Fraud Act, 2006
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Fraud can be…
External Internal Collusion
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Fraud can be…(cont’d)
Simple or Complex
Fraud can be…(cont’d)
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opportunistic
or
premeditated
Opportunistic Fraud
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Opportunistic Fraud
Aimed at
financial
institutions or
their
customers
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Fraud can be …(cont’d)
Where Do You Look for Fraud?
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Types of Fraud Inherent in the
Financial Services Industry
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Computer Crime and Cyber Crime
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Credit Card Fraud
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Customer Account Fraud
Identity Fraud
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International Fraud
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Securities and Investment Fraud
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Large Scale Corporate Fraud
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Large Scale Corporate Fraud
Lending and Credit Fraud
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Lending and Credit Fraud
Bribery and Corruption
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Money Laundering
Insurance Fraud
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Staff Fraud
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Categories of Fraud Inherent in the Financial
Services Industry (cont’d)
1. Application Fraud
2. Facility Takeover Fraud
3. Misuse of Facility Fraud
4. Identity Fraud
5. False Insurance Claims
6. Asset Conversion
7. Staff Fraud
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Categories of Fraud Inherent in the Financial
Services Industry (cont’d)
Main categories of Financial
Crime:
1. Money Laundering and
Terrorist Financing
2. Fraud
3. Data Breaches
4. Bribery and Corruption
5. Sanctions and Freezes
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Reputational Risk
‘It takes 20 years to build a
reputation and five
minutes to ruin it’
Warren Buffet
Run on the Bank
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Run on the Bank
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Run on the Bank
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Financial and Operating Loss
Moral and Social
Responsibility
Economic Impact
Green, M. (2013)
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Cost of Fraud in the Financial Services Industry
Nederlandse Vereniging van Banke, 2014
Cost of Fraud in the Financial Services Industry (cont’d)
43The UK Cards Association, 2013
Picture of Fraud in the Financial
Services Industry
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# Fraud doesn’t occur here attitude
# Visible fraud vs. invisible fraud
# Lack of common fraud definitions
# Lack of fraud statistics
# Exchange of data on confirmed fraud is prohibited by law
# Doesn’t share data on best practices
# Counter fraud staff lacks adequate resources and training
Main Issues/Challenges Faced by the
Financial Services Industry in Lithuania
Elephant in the Room
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Issues with Law Enforcement
# Often lack resources,
adequate investigative
skills and motivation
# Don’t understand
banking / banking
products
# Often engage in ‘blame
the victim’ behavior
# Jurisdictional limitations
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Technological advances allow for new
types of crimes to be committed
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Bank robberies in the Netherlands
50Nederlandse Vereniging van Banke, 2014
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The Contemporary Crime Dilemma
‘If a network of Nigerian scammers based in Amsterdam defrauds
French, Australian and American credit-card holders, where does the
crime occur?’‘Earning with the Fishes’, The Economist, 2014
General public lacks awareness on fraud risks inherent in banking products and how to safeguard themselves against those risks
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And finally…
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Movie
Time!
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https://www.youtube.com/watch?v=F7pYHN9iC9I
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The weakest
link?
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The Customer
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Fraud Risk Management
in the Financial Services
Industry
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Main Elements
of Fraud
Prevention
Framework
Prevention Detection Investigation
Fraud Prevention
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# Organizational culture/Tone from the top
# Fraud Prevention Policy
# Know your customers, staff, partners
# Fraud risk assessments
# Policies, processes and procedures
# Fraud Risk KPIs
# Counter fraud training
Fraud Detection
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# Internal/External Counter
Fraud staff
# Monitoring tools
# Audits
# Incident reporting
# Whistleblowing
How Do You Detect Fraud?
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Fraudster 1
Fraudster 2
Fraudster 3
Fraudster 4
Fraudster 5
Fraud Investigation
# Internal/External investigation
# Loss recovery / Business Continuity
# Disciplinary actions
# Police investigations
# Lessons learned/Adjustment of processes
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Time for a Test
1. Everyone stand up,
please!
2. Do you have a smart
phone?
3. Do you have a Gmail
account?
4. Do you use this App?
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Thank you for your attention!
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