Use of analytics in financial services to combat Fraud …download.101com.com/pub/tdwi/files/TDWI...
Transcript of Use of analytics in financial services to combat Fraud …download.101com.com/pub/tdwi/files/TDWI...
Use of analytics in financial
services to combat Fraud and Anti
Money Laundering.
The Data Warehouse Institute (TDWI)
3 August 2011
Richard MooreHead of Security Advisory & Investigations, Group SecurityCommonwealth Bank of Australia
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Disclaimer
The material that follows is a presentation of general backgroundinformation about the Bank’s activities current at the date of thepresentation, 3 August 2011. It is information given in summary formand does not purport to be complete. It is not intended to be reliedupon as advice to investors or potential investors and does not take intoaccount the investment objectives, financial situation or needs of anyparticular investor. These should be considered, with or withoutprofessional advice when deciding if an investment is appropriate.
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Themes
Evolution of fraud and Anti Money Laundering in banks
Technology and analysis working together
Some high level successes executing strategies
Benefits of the approach including
Increased customer service
Reduced fraud
Reduced regulatory risks
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Commonwealth Bank Group scale
Australia’s leading provider of integrated financial services
Employs 42,500+ staff globally
Customer base 11+M
7 million+ domestic transactions each day
70,000 international transactions each day
More points of access than any other Australian bank
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Firstly, Group Security’s Operating Model
Fraud policies and
standards
Fraud Risk Assurance
Program
Training & Awareness
Intelligence & Planning
Strategy & Capability
Fraud Risk Advisory
Fraud detection policy
& standards
AML, fraud and
Sanctions operations
Rules, modelling, data
analytics & information
Measurement
Financial Crime
Shared Services
Protective security
policy & standards
Physical Security Risk
Assessment Program
Global Incident
Monitoring Centre
Protective Security
Investigations policy &
standards
Staff investigations
Major fraud
investigations
Internal control reviews
Investigations
Business continuity
management policy
BCM systems &
reporting
Crisis & emergency
management
Business Continuity
Management
Bankwest
Indonesia
New Zealand
Others
Chief Security Officer
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2005: Group Security IT Strategic Plan
Access to timely and accurate information about current & emerging risks to the bank, including:
fraud
money laundering
terrorist financing; and
other criminal activities
Scaleable ability to monitor activity across a wide range of products and channels, both in Australia and overseas
Help all business units to monitor and respond to their risks 24 x 7, minimising our customer’s fraud exposure
Deliver and demonstrate an efficient and valuable service to our customers & the Group
Reduce the total cost of ownership for our fraud detection solutions
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Our strategy…
Holistic
Financial
Crime
Management
Scaleable
Systems
Lower
Costs
Centralised
Case
Management
High
Quality
Metrics
Improved
Customer
Service
Data
Re-use for
BI
Disconnected
Approach
Bespoke
(siloed)
Solutions
Higher
Costs
Poor Case
Management
Different
Fraud
Departments
Multiple
Data
Marts
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Financial Crime Platform
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How it works…
Fraud AML Sanctions
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Filter approach – targeting the right activity
Fraud AML Sanctions
Detection Engines
Case Management
Analytics
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Our Evolution of Analytics
• Off the shelf solutions –neural and parameter driven
• Vendor supported models
• Basic rule writing capability
• Converted operations people to ‘analysts’
1999 - 2003
• Started recruiting ‘analytics’ resources.
• Enhanced rule writing
• Use of analytical software
2003 - 2007 • Data management platform – rich, clean data.
• Advanced analytical resources.
• Advanced rule capability
• Integrated filters, data matching, decision tree, behavioural modelling capability.
• Bank driven models
2007 to now
Driven by;
Increasing business volumes & fraud
Investment in people & technology
Vendors not able to keep up with change
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Goal of Event Prevention: Minimise Cost & Risk
Finite resources to action alerts – require efficiency
Right transaction in a high volume/low risk environment
Reduce customer impact whilst minimising loss
Manage total cost
Law of diminishing returns
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Customer Risk & Value
Analytics helps us prioritise focus in higher risk segments – those that hurt.
Customer service – priority to reduce impact and avoid loss
Reduce reputation & financial loss to Group
Maintain public confidence in the payment channels
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Optimising Detection Program
Analytics and Operations team working together – capturing more fraud with less alerts
Understanding the environment, customer response and rule/model performance
Prioritising alerts within operational constraints
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Showing the Benefits (Loss to Turnover Ratios)
Improvement in all categories relative to volume
Actual dollar fraud losses reducing year on year – in the main
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Lessons learnt
Invest in developing a strategy for financial crimes control, including:
IT systems
organisational capability
critical success measures
Good analytical systems demand higher quality, granular data.
Enterprise-wide strategy is required
Leverage existing & emerging operational, technological or regulatory requirements (i.e. AML, privacy, technological changes)
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Emerging Threats & Our Response
Criminals morph and target weakest point
Analytics, agile systems and flexible operations allow us to adapt to changing trends
New products and channels are brought into our monitoring program
Supporting our customers in strengthening their controls
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Questions….