Frontline to Back Office: Modern Tactics for Confident Fraud Defense

Welcome. Welcome, everyone. We're happy to have everyone here. We're gonna go ahead and get started. We wanna be mindful of everyone's time. So my name is Brynn Johnson, and I am a part of Advanced Proud Solutions. And I'm so happy to welcome you to this session with Alligent. We're gonna be talking about, you know, frontline to back office modern tactics for confident fraud defense. And this topic is so timely because it just seems like the minute we seem to have a handle on things, fraudsters keep evolving. So we're here to chat about that and tactics to stay confident in your fraud defense. So today, you will have the benefit of hearing from these really, really credible and experienced experts in this topic. So we're gonna have Alfred Evans, principal product manager at Alligent, and Jordan Bothwell, VP of strategic partnerships at Advanced Fraud Solutions. So you're gonna be in good hands hearing from both of our speakers today who have a long history in this line of work and this industry. So enjoy. Great. Thanks, Brynn. Hi, everyone. This is Jordan Bothwell from Advanced Fraud Solutions. Here to talk, first off, a little bit about the current landscape of check fraud. Just wanna share experience of what AFS is seeing in the market and share that with you so that you are aware of what we're seeing, and then, of course, we'll share some tactics on best practices to fight, that current instance of, check fraud. So first off, just to kinda lay the groundwork, checks continue to be the payment method most susceptible to check fraud or excuse me, most susceptible to fraud, and that's check fraud. And and really what we're seeing is that, checks are are not going away. Right? They're still in circulation, and fraudsters find it really easy to perpetrate and, take advantage of of that check fraud payment method. And so over the last couple of years, we've seen that the incident of check fraud has continued to rise. We found that the impacts from COVID are lingering and that most institutions are still seeing, that check fraud increase. So, in other words, those impacts of COVID are are sticking around, and fraudsters are continuing to perpetrate the check fraud channel. AFS actually expects that we'll continue to see that, despite what the economy does. This kind of parallels, you know, an economic downturn that we saw back in two thousand eight, two thousand nine, period as well, right after AFS was founded. Incidents of economic downturn just lead to to more incidents of check fraud. Another thing that we're seeing is that, you know, related to, the incidence of SARS doubling, between twenty twenty one and twenty twenty two and continuing to rise is that the overall check value value, excuse me, also continues to increase. And what this means for you is that the risk associated with each check-in circulation also rises. So in other words, every check that's out there is for a higher dollar value, and that means that every check out there is more risk to that financial institution. A a stat that I always like to talk about is the true cost of fraud. And what that says is that for every check-in circulation, that is fraudulent for a financial institution, it actually costs them, actually four dollars and forty cents. So for every dollar of fraud loss that they're taking, it actually costs that institution four dollars and forty cents. And that's due to things like soft cost involved in dealing with that check. So, paying your employees, dealing with the member or customer reputation, filing those SAR reports that we're talking about, all of those things add up. So the actual face value of the check is over four x, resulting in fraud for that financial institution. So when you're thinking about your overall fraud losses related to, check fraud, make sure you think about those soft costs, and and think of it four x what it actually is, unfortunately. And scammers are are leveraging socials, specifically related to, you know, Telegram, when when they're dealing with these check frauds. So we've, you know, we're seeing a lot of those same things that we have always seen, but in more numbers such as recruitment and coordination. So recruiting with other criminals on the dark web. Right? They these fraudsters find forums and and places that they can share what's working. We've seen incidents of fraudsters sharing things like cutoff times and, dollar value thresholds that financial institutions are using so that they can more easily perpetrate those things. So just as we're sharing information today, they're sharing that information amongst themselves. So it's it's always good to stay one step ahead of them, and ensure that you are aware of the latest tactics that they're, that they're facing. A lot of what we're gonna be talking about today is how, you know, fraud is is not linear and, a lot of this information is connected. So in relation to phishing, for instance, you know, a criminal may collect the personal bank information and then use that to write checks. So, check fraud may be stemming from other areas, that are, you know, also important to you, and that check fraud is a result of those criminals stealing that information, and then writing those fake checks. So, not only can fraudsters gather information from checks, they can also use that gathered information, to then write more checks. So it's always important, again, to shore up your your resources and making sure that you are aware of all of the different ways that these criminals can gather information that then leads to, more losses for for your financial institution. So when we think about fighting check fraud in real time, some of the things to think about would be related to, consortium data. So AFS is a consortium database. We're collecting data from about two thousand five hundred institutions, and we've been doing that for over fifteen years. And and what we're doing is we're looking at other institutions and saying, hey, have have they seen, instances of check fraud from this particular account? If so, any return information that that they are receiving, we're collecting that and then we're making that available to all of the institutions that we work with. So what it does is it identifies patterns to prevent fraud before it strikes another FI. So in other words, if one institution falls victim to a check fraud scam, we wanna make sure that other institutions don't fall victim to that same check fraud scam. So, neighborhood watch approach to fighting check fraud, if you will. And so we're leveraging that data, that we've been building for, again, a number of years. We're making sure that, you know, if you are located in a certain area, not only do you get information from that area, but you get information from the surrounding areas and all across the country, because these criminals tend to, repeat their patterns. Right? So if if something worked in one area, they try it in other areas as well. So we wanna make sure that you're not, just solely focusing on what's happening in your area, but you get the the information about what's maybe coming, based on what other, institutions are seeing. And and really the goal is to ensure that that you stay one step ahead of those fraudsters. So now we're gonna talk a little bit about kind of the omnichannel solutions that help identify, this check fraud that we've talked about. And I'll I'll turn it over. Thank you, Jordan. So we've we've heard of you know, in the check process space, we've and as financial institutions, you probably heard of omnichannel a lot, through either through, you know, just discussions or two conferences that you've had. Right? So as part of this this process, right, of integrating, you know, kind of getting all the processing in place and making sure that fraud is mitigated at the earliest possible time. We we have this omnichannel approach as it relates to our newest processing platform, which is called Unifi, single platform that processes, you know, data and transactions for all the deposit channels that for your financial institution. For example, you know, you have we have full service and self-service channels such as teller teller branch, ATM, ITM mobile, commercial back office, as well as in clearing channels where you're getting ECL, you know, files from the federal partners to process on a daily basis. So why the omnichannel approach? Right? We want to make sure that there's a consistent experience across all these channels. Right? That provides efficiencies in the form of streamlined operational processes as data flows through the system. And we're talking about, you know, consistency in the form of how the system behaves in terms of business rules as well as what the users who are doing the reviews see in, you know, in making those decisions. So it applies to the day one and day two processes. As we know, day one is normally geared towards more of your in clearing and proof of deposit channels, that you're collecting on on a from a day to day basis. And then day day two meaning would be more geared towards the returns processes like outgoing returns, incoming returns, and so on, and and and adjustments. So this lends itself to treating all the other channels as a cohesive system, which helps to ensure that the data and information is consistent throughout the journey, not just from a data mining point of view. You may need reports, but also what the user sees in making decisions as they are reviewing transactions. And it helps with the fraud prevention story, right, because it helps to maintain the objective of keeping the cost of processing each item at a minimum. You know, as Jordan mentioned, you know, the cost is there's an additional cost for each fraud. Right? So it's it's four times whatever the cost of the item is. Then the end to end the end to end enterprise deposit automation, we have logic and algorithms within the system that helps to, you know, read the data that's coming in and make decisions based on that. For example, you know, checks that are, you know, over certain dollar threshold, you know, send those to review or send it to the engine to do the lookup. And these are, what what we try we we we make these manageable in a sense that they are configurable options that can be changed based as as things change. Jordan mentioned in the beginning that, you know, fraudsters also, you know, have meetings and and have, you know, group, you know, group discussions as to how best to to the how do we stay ahead of the the, you know, the AFSs of the world? How do we stay ahead of the FIs so we can continue to the fraud? So that's some of the things that, you know, provide some consistency and some manageability in the process where, you know, the FIs has some control over what profiles to change or update on a daily basis to stay ahead of that. And then, you know, the consistent, fraud mitigation, you know, uniform mitigation methods. You know? Every transaction goes through this process. I can change my my, configuration to look at something else or higher threshold from day to day, and that is that applies to all channels. And then the benefits. Not only does it enhances the detection accuracy and reduce false positives because one of the things that you don't want as well, on the other side of it is you wanna detect fraud and and take care of it ex you know, expeditiously and in the most efficient manner, but you also want to ensure that you're not creating, a vast majority of false positives because as you know, users, when they're in the system, they're doing review lots of false positives, it becomes part of their day to day where they might miss the important things. So those are, you know, some of the things that that we're adding and that we have as part of this process to to mitigate, fraud in all the channels. Next slide, please, Jordan. Yeah. So, Alfred, I think that's a good point, what you just mentioned about, you know, the false positives. It's an important thing in the the fraud world, you know, of course, to identify the fraud when it's there. But it's just as important to if there isn't fraud, to make sure that that check gets processed, in a timely manner, right, from a customer or member service perspective to make sure that that person gets access to their funds, in a timely manner. So, this is important in identifying the fraud is making sure that those good checks get get processed. And I think one of the things when we're talking about, you know, check fraud moving from deposit points and why omnichannel is is so important, when we're talking about these fraudsters, You know, paying attention to trends and things that work, and, you know, taking advantage of these forums that they belong to. One of the things that that they also see is which areas are not monitored. Right? So, they they notice that, hey, checks that get deposited at the ATM, for instance, I have a higher success rate than those that get deposited through, the mobile channel. And so then they that's the channel that they go for. Right? The path of least resistance. So what we see a lot in the fraud world is that, it's kind of, like, whack a mole. You know, when when one area gets covered, fraudsters pop up somewhere else. So that's why omnichannel is is really important. You know, omnichannel in in conjunction with the consortium approach, really goes a long way to not only, leveraging information across all of the deposit channels that you might have, but leveraging it leveraging information, that you just may not have access to within your own four walls, because you're leveraging something like AFS, like TrueChex that's going to look at all of the institutions, the twenty five institutions that we work with, and leveraging their information, not just the information that that you're seeing. So that that's something else to consider in in addition to the omnichannel, approach there. Right. And then, I mean, that that's that's so true, Jordan. I mean, the other part is with the Algern scoring model, where it has some built in capabilities where we the you know, as items are being read into the system, we create, you know, a key of the account number and and the on the RT, and save that. And then for every item that is presented with that key, we run, we do some AI modeling and and and run some routine on those items to detect things like, you're able to detect things like there's an amount there's a check that means that's being presented that is more than the average that this user or this member or account holder would normally, present for payment, or there are multiple deposits. This customer normally makes ten deposits in a month. Now, you know, week one, I'm seeing this customer has made twenty deposits. So those are things that we're using. We're not just looking at you know, the amount is higher than this value. We're looking at also activity, on the account that helps to, again, helps to further, you know, enhance the ability for us to catch fraud early in the process. So as it relates to the real time prevention, I mean, like like I mentioned, one of the things that, one of the reasons why we want to make sure that we do this real time. Right? So as soon as the item is being captured, you know, at a point of resentment, ATM, mobile, those unattended capture, sources, as well as, you know, in clearing, teller, so on and so forth. You know, every item in every transaction is compared against this database to to check if there's potential for fraud as well as, you know, other internal tools or internal business rules that can be applied to detect those items. Then once the if something is detected, any anomalies, we create alerts that's sent across the network. You know, as part of the processing, the downstream processing, we detect it at the point of capture. We save that information with the item. As it goes to the next process, that information is provided to the user who is doing the review to to make a decision. I mean, we can also, as part of the real time scanning, is depend on the response that's returned, we can make a decision to reject the item upfront so it doesn't go through the system or doesn't progress through the other processes in the system. So all of that is, you know, just to make sure I I like as Jordan said, right, the biggest thing here is to reduce the cost of processing an item, which in turn means that, you know, you know, adding variables and adding profiles to ensure that fraud is kept to a minimum. And then the, updating the database in the in the form of being able to provide information as to the status of what was, taken on the item, what decision was taken. So that becomes part of the history, that can be used to access and can be used in further detect the, detection models. And then the the, with the collective knowledge, being able for the FIs to contribute to the real real time transactional data because, obviously, you know, the strength is in the numbers, and it helps to you know, the stronger it is, the, you know, the the the the more data you have, the more you have to, you know, match against and being able to to make your decision as whether this is a good check or not. You know, a million I a million records versus a hundred records is is is much better because you have more data to make your decisions off of. And, again, like we mentioned before, being able to reduce the instances of false positives. Alright. So when we think about all of this kind of holistically, from an omnichannel perspective and and check fraud, you know, really what we kind of want to reiterate is that, it's not just about reviewing these things in silos. It's reviewing how all of these things are related across the entire, financial institution, all points of presentment, not only for a consistent experience for your, account holder, but a consistent experience for, you as the financial institution. And, you know, in reality, a consistent experience for the fraudster as well. So they, don't kind of poke holes in in the overall structure that you have and and, find ways to, to perpetrate truck fraud. Right? They they move on to, something else or somewhere else, because your, internal policies, shore up all of those different deposit channels by which a consumer can deposit an item. So, you know, things to look out for. Look for hidden risks that go beyond just looking at the channels, staying ahead of sophisticated scams. Joining things like this are great to find out what's going on in the market specifically, leveraging tools, like you have with the AFS and Alligent partnership, to ensure that your different deposit channels are protected. Using analytics. Right? Alfred talked a lot about the great analytics, that look at patterns across all points of of deposit and, you know, reviewing data transactions, whether they incur in branch, you know, online or mobile. You know, having a tool, that's going to look at all these different, channels because your employees might not be looking at the same deposits. Right? They may be in different departments, and and those departments may be, monitoring different deposit channels. But having a tool like Unify with AFS is going to allow for, your institution to have the benefit of eyes and ears on all of those channels with one consistent approach without having to necessarily have the staff, doing that, you know, on on all of those different channels because they don't have eyes and ears across everything at all time, but the UNIFY with with AFS environment does. Yeah. And and yes. And, you know, when we talk about integrations, right, we normally have, you know, we think of sleepless nights and stuff, but the integration with AFS is is pretty seamless as as it mentioned here, and seamless in the sense that it's it's it's a call out from our, what we call our sort panel engine or or or it's a web service call, and our sort panel engine is geared, you know, towards making those calls. So it's a it's an integration that is that is simple, but the end result is very effective in the sense that, you know, like I mentioned before, we're capture we're scanning every single item, based on business rules, based on what's been established for the financial institution to be able to, you know, send those items to look up against the AFS database, to return a response, and then make a decision whether to flag that item for review or to reject the item upfront. And then there's centralized view on analytics, additional analytics. So you'll be able to see all the transaction. It's Unify has a centralized dashboard that provides you details on items captured, items that are, pending initial review, and also, you know, decisions allows the user to log in and make the decision from the same widget. So you're not using two disparate systems, to be able to go from, you know, viewing what needs to be done and actually making the decision to review the items or the action of reviewing the items. Next slide, Jordan. Alright. So I think we've reached the point for, questions and discussion. Brynn, I think we'll tap you back in and see if there's any questions from the group. Yeah. That was a great great session. Thank you. So one question I see is this is a good one. How can I balance customer and member service with fraud mitigation? Yeah. So I'm happy to take that one, and and it's an important thing to consider because, you know, like we talked about, you don't want your, good account holders with good deposits to be impacted by, policies and procedures that are in place. So, you know, definitely all of the settings that are available to, you know, make sure that only the high risk items get flagged for review or got rejected, is important. But then there's also an element to consider where the fraud prevention that you are enacting, is a a a form of you know, customer member service in and of itself. Right? If you can protect that account holder and their funds, you know, they're looking at you as as their financial institution to protect their money that they have with you. So also having that layer in place goes a long way to say, hey, before you spend these funds, there's a chance that this item is going to get returned. So we're gonna place a hold on these funds, so that, you know, we don't have to come asking you for this money down the road. We've we've placed these funds on hold. You know, when that check gets returned, we don't have to back anything out. So that really does go a long way from a, you know, customer member service perspective. Great. That is a super helpful answer. Thank you, Jordan. Let's see. I think I have another one here. So how are changes in the configuration communicated? For example, if I wanna change logic to send items with certain amounts to the fraud engine. Yeah. So I I can take that one. So from an Algern point of view, as as as I mentioned about the the configuration that allows you to not just seamlessly integrate with the AFS and, you know, industry leading fraud preventers, financial solutions like AFS, The same thing with the with the changes. Right? As a as the financial institution, you'll be assigned with a technical resource, a technical account manager, who would be at your beck and call, you know, for lack of a better term, where you would, you know, communicate, changes that you'd like to to see or changes that you'd like to make in the system, around that. There are some instances where customers do have control over the business rules and can make changes themselves, you know, with with guidance, obviously, to help us to do that. But those changes can be done through your technical account manager. We have a portal that you can also log in and and and submit those changes. And in some cases, if you're an on prem customer, you may have access and control over the changes that you make yourself to the to the to the GUI. Great. Thank you for that answer. Well, I think that is you know, we're coming up on the end of this session. I'm wondering if we're seeing any other questions come through. It looks like those were the questions. I wanted to make a note that, the deck and the recording will be made available to you after this webinar. So, if if you wanted to share it out or refer back, we will make sure that you have those in hand. And I just want to go ahead and thank everyone for attending. And this is such an important topic, and I know you have, we all have tight schedules, so it's really helpful and important that you were all able to join today. So thank you so much, and have a great rest of your day.