A Deep Dive Into Wire Fraud and Business Email Compromise

Consumers demand for fast and convenient payments channels has increased opportunities for fraudsters to target financial institutions and their customers.

With wire fraud and business email compromise (BEC) attacks increasing, it is critical that banks remain vigilant to prevent fraud losses and reputational risks. We are sharing unparalleled data-driven insights into the current fraud landscape that we uncovered through the Verafin Cloud, with a deep dive into wire fraud and BEC. The Verafin Cloud contains an immense set of anonymized data from over 3,000 financial institutions, comprising $4 trillion in assets. Importing core, ancillary, open-source, third-party and consortium data, and analyzing over a billion transactions a week in the Verafin Cloud, we can accurately identify emerging fraud trends and create a substantial set of labeled fraud data to train machine learning analytics for fraud detection.

The Main Target for Wire Fraud
Criminals are constantly searching for weaknesses in banks’ wire fraud controls and will shift tactics to target points of least resistance – often your own customers. Criminals have refocused their efforts to leverage your customers as an attack vector, targeting them with known fraud scams. Statistics from the Verafin Cloud show that nearly three-quarters (74%) of all wire fraud cases targeted individuals, with elderly persons accounting for 63% of all people victimized by wire fraud.

BEC Behind Majority of Loss
While individuals were more frequently targeted by wire fraudsters, data in the Verafin Cloud shows that businesses sustained 73% of all financial losses to date, driven largely by BEC schemes. While most BEC attempts in our analysis involved wire transactions, 24% of BEC occurrences involved ACH transfers, demonstrating this channel is not immune to attack. A high value, high speed, and widespread scheme, BEC has become the No. 1 reported crime to the FBI, and is an ever-increasing threat to all banks.

Payee Risk Analysis
At many banks, a wire sent to a first-time beneficiary is automatically considered high risk. This assumption creates undue friction for your customers, as well as massive alert volumes — especially when a large proportion of wires from banks are destined for new recipients. This figure was substantial in our data: 23% of wire transfers were directed towards new payees for a customer. Banks should consider technology that provides visibility into the transaction counterparty in real time to ascertain whether a wire recipient is truly suspicious or has a trusted history of activity at other institutions.

A Step Ahead
Wire fraud is a growing threat for financial institutions. As fraud schemes evolve and become more sophisticated, wire transfers —which can be high value and irrevocable — are the perfect target for fraudsters. As criminals increasingly target your customers with a variety of fraud scams and schemes, banks must remain vigilant and ensure that holistic fraud detection and management solutions are in place to prevent loss and stay a step ahead of financial crime.

The Top Five Technology Trends in Financial Services


9-10-14-CDW.jpgFrom transactions migrating to the cloud, to mobility reaching a tipping point and the influence of big data, the financial services industry is facing a new reality in 2014 and into the future. While addressing customer needs, financial services organizations must also maintain a sharp focus on meeting regulatory compliance standards and proactively addressing cyber threats.

1. Cloud Adoption Accelerates
Shifting business models, an intensified focus on efficiency and demand for customer-orientated technology is driving cloud computing technology adoption like never before. The fact that 71 percent of financial services organizations say they will invest more in cloud computing this year, which is up from 18 percent in the previous year, is proof positive that the cloud adoption ship has sailed, according to a 2013 report from PwC. And, the cloud is infiltrating all sectors of the financial services industry. Sixty percent of banks worldwide will process transactions in the cloud by 2016, while 77 percent of capital markets firms will leverage the cloud this year alone, according to technology research firm Gartner. In addition, many in the financial services industry have started to realize the quantifiable benefits that the cloud can deliver, like reduced infrastructure and hardware costs. The average cost reduction due to cloud computing savings on infrastructure is 23 percent, says a survey of a variety of companies by Rackspace and market research firm Vanson Bourne.

2. Mobility Makes Its Move
Mobility in the financial services industry has reached a tipping point. With the number of U.S. smartphone users predicted to increase to more than 265 million by 2017, according to research and consulting firm Frost & Sullivan, financial services organizations that haven’t created a mobile strategy are putting their growth and efficiency at risk. The mobile app market is exploding as banks, credit unions and capital markets firms embrace mobile services as a way to harness this constant, real-time interaction and significantly enhance the customer experience. In fact, 32 percent of U.S. adults now bank using their mobile phones, 51 percent of consumers use their phones to make a mobile payment and 51 percent of capital markets firms intend to invest in app-driven technology to achieve efficiencies, says surveys by the Credit Union National Association, the Pew Internet & American Life Project and IPC Systems.

3. Cyber Security Concerns Loom Large
The proliferation of mobile apps, cloud computing and big data are just some of the reasons why cyber security remains a top concern for the financial services industry. While retail security breaches demand the headlines, attacks on financial institutions still loom large. In fact, 37 percent of cyber attacks are directed at financial services organizations, according to a Verizon Data Breach Investigations Report. Recognizing that it’s critical to proactively combat rising cyber crime, 93 percent of financial organizations are maintaining or increasing their cyber security investments, says Ernst & Young. This includes allocating 46 percent of information technology (IT) spend toward security improvement, expansion and innovation over the next 12 months.

4. Big Data in the Driver’s Seat
Seventy-one percent of the financial services industry is already using big data and predictive analytics, but the demand for big data is getting bigger, according to the University of Oxford and IBM. This is the year that organizations will truly leverage big data to change the way they do business and achieve a competitive advantage by enhancing their knowledge of customers and prospects. Leading financial services firms are more confident than ever before about how they can use big data: 70 percent of data leaders say they can generate forward-looking insights from their data and 72 percent understand how to integrate performance and risk analytics, according to State Street Corp., which surveyed global financial institutions.

5. Regulatory Compliance Remains a Priority
Making it a priority to stay ahead of the regulatory compliance curve is crucial to the success of any financial services organization. Unfortunately, this is easier said than done. Nearly 80 percent of financial institutions admit to significant concerns about staying abreast of regulatory change and complying with regulator demands, according to a survey by Wolters Kluwer Financial Services. That is likely the reason many are heavily investing in compliance technology—to the tune of a 35 percent growth in compliance spending by 2015, says the Aite Group—as the market maintains its focus on compliance and reform. The trickle down effects of regulatory reforms—such as the Dodd Frank Act and recent Volcker Rule—continue to impact some 87 percent of financial services companies, according to Deloitte.