78% BFSI organisations believe frauds could surge in next two years: Deloitte survey

As banking and financial institutions are struggling to deal with a growing number of fraud incidents, 78% of the respondents said that frauds could increase in over next two years, as per the findings of the fourth edition of the Deloitte India Banking Fraud Survey.

Key reasons identified for the increase in fraud incidents over the next two years include large-scale remote working models, increase in customers using non-branch banking channels and the limited/ineffective use of forensic analytics tools to identify potential red flags.  

Retail banking was identified as a major contributor to fraud incidents, with 53% respondents indicating that they had experienced more than 100 fraud incidents (over the last two years)— a 29% increase since the previous edition. Similarly, the non-retail segment saw an average of 20 fraud incidents, highlighted by 56% survey respondents, a rise from the previous 22%.

Additionally, data theft, cybercrime, third-party-induced fraud, bribery and corruption, and fraudulent documentation have been identified as the top five concerns with over 42% of respondents (cumulative) reporting to be victims of these.

“The impact of the pandemic has resulted in institutions across the globe operating in an entirely new environment. Increase in the use of digital channels for transactions by customers, on one hand, has contributed to the ease and speed of transactions. On the other, with evolving and complex business models and increased use of technology, existing fraud risk management frameworks have been introduced to newer and more complex challenges,” said K.V. Karthik, partner, Financial Advisory, Deloitte India.

Survey respondents indicated that the top three outcomes of Covid-19 on their Fraud Risk Management (FRM) function would be increased dependence on analytical tools for fraud monitoring and detection (25%), the need to create awareness about fraud among customers and employees (23%), and a change in the target operating model to enhance capabilities of the remote FRM function (21%).

The survey respondents cited areas such as KYC/anti-money laundering (21%), fraud risk assessment (17%), and fraud detection (15%) would benefit from deploying AI/ML technology. “The use of advanced technologies such as AI/ML can analyse large amounts of data, filter out false alerts, and identify connections and patterns that are too complex to be picked up by straightforward, rule-based monitoring, or the human eye. This will position financial institutions to respond faster/better and cope with future economic crises with resilience,” the report said.