The 2010 AFP Payments Fraud and Control Survey report reveals that payments fraud remains rampant: a majority of organizations experienced attempted or actual payments fraud in 2009. Companies faced pressures from economic turmoil, financial crises, waning consumer demand and cash flow constraints. These challenges, coupled with the continued growth of electronic payments, provided opportunities for payments fraud. While most organizations were subject to payments fraud attempts in 2009, slightly less than a third reported that the number of incidents increased from the previous year.

Check Fraud

Checks remain the payment method most frequently targeted by criminals to commit payments fraud. The most widely used techniques to commit payments fraud were:

• Counterfeit checks using the organization’s MICR line data (72 percent)
• Alteration of payee names on checks issued by the organization (58 percent)
• Alteration of dollar amount on checks issued (35 percent)

The typical organization that was subject to attempted/actual check fraud in 2009 faced a median of six fraud attempts during the year. Forty-six percent of organizations experienced between one and five check fraud events while 14 percent had suffered between six and ten events. Twenty-seven percent of organizations saw a far greater number of check fraud events—more than 20. Large organizations were typically subject to twice as many check fraud events as were smaller organizations—eight versus four events.

For more than 25 years, SQN Banking Systems has been helping banks fight fraud with a comprehensive line of software that finds check and ACH fraud using multiple methods.  SQN offers image fraud analysis, automated signature verification, transactional analysis of debits and credits across one integrated workflow for faster identification of potential fraud.  SQN can also assist your bank in detecting fraud with official check barcoding, exception item processing and safe deposit management.  SQN Banking Systems delivers innovative solutions, making large, mid-tier and community banks more competitive and profitable.

SQN Banking Systems Announces Linux Versions of SENTRY: SigCheck and SENTRY: Inspect

SQN Banking Systems has responded to client demand for open source enabled solutions by releasing Linux versions of its SENTRY: SigCheck™ and SENTRY: Inspect™ products.

Open source systems are easier to customize, more secure and offer a lower cost of ownership to users.  Banks and credit unions using open source operating systems and database management systems can now use SQN’s solutions to detect suspected forged and counterfeit checks. SQN’s products will run on traditional server platforms such as Microsoft Server 2008 and Microsoft SQL Server 2008 as well as open source platforms Debian Linux and PostGres SQL.

“As more of our customers are installing open source operating systems and database management systems in their IT departments, we decided to write Linux versions of our flagship products,” said Joe Uhland, president of SQN.  “By listening to our clients’ needs, we are able to continue to provide them with the most advanced and flexible fraud detection solutions.”

SENTRY: SigCheck compares images of signatures electronically to detect suspected forgeries by searching “on-us” check images, extracting signatures and comparing them to reference signatures from signature databases (such as SQN’s SENTRY: Signature™).   SigCheck determines how well they match, spotting potential check fraud automatically, and allows bank personnel to review them further before making payment decisions.

SENTRY: Inspect software automatically reviews targeted on-us check images and compares them to a data template in the customer’s profile.   Inspect then flags items with discrepancies for further review. By reading the legal amount and payee line information, Inspect complements existing image based positive pay systems. Check fraud schemes are identified faster and productivity is significantly improved over manual or semi-automated research methods.

3 Keys to Successful Operations

There was a time when a few talented individuals, working in anonymity, could adequately handle a bank’s fraud prevention activities. Today, most banks require a team of specialists working closely together to effectively manage loss mitigation across the institution. In looking at the components of successful loss mitigation programs, The Catalyst Consulting Group identified three critical elements common to most successful programs: organization, people and tools.  While each element is important in its own right, in concert they can combine to create truly effective fraud management programs.

Organization

Although commonly underestimated, the way an institution organizes its loss mitigation activities can have a profound effect on its success.  Key organizational issues include strong, visible executive sponsorship; dedicated loss mitigation leadership; centralized loss mitigation functions; and coordination of loss mitigation activities across the institution. Among these, executive sponsorship is among the most important because it is a visible symbol of the institution’s commitment to a successful loss mitigation program. Executive sponsorship can also materially influence access to the other two critical elements required for success: people and tools.

People

For many institutions, especially smaller banks, people are still the key to loss control. From the teller line to the platform to the back office, trained and experienced staff can be a formidable barrier to fraud. For all institutions, weeding out “bad actors” upfront via data validation and solid underwriting at account/loan opening can go a long way to preventing significant losses down the road. “Know your customer” has been a critical component of loss mitigation for years and it remains so today.  It is even more effective when it is emphasized by management and reinforced by training. 

Tools

Soaring transaction volumes and rapid growth in the number of payment channels have doomed a manual approach to loss mitigation. High transaction volumes, large customer bases and increasingly complex relationships dictate the use of automation. Tools such as SQN’s fraud detection software allow loss mitigation staff to scan large numbers of accounts and high transaction volumes for activity and images that fall outside the range of “normal” based on bank parameters. Once highlighted, suspect transactions can be reviewed more closely by the loss mitigation staff. This greatly increases the effectiveness of bank fraud control efforts. Banks have also begun to use integrated neural networks to analyze loss patterns in an effort to “connect the dots” and identify fraud patterns.

Traditionally, bank loss mitigation activities have been defensive in nature, with institutions responding to losses that they have incurred. This is beginning to change, as banks become more aggressive in their efforts to control fraud losses. Rather than waiting for losses to occur banks have begun to anticipate where future losses might occur. Limiting fraud exposure is now a consideration in new product design and deployment. A case in point is consumer item capture. Allowing customers to deposit check images remotely might have broad market appeal, but most banks are restricting enrollment to limited customer segments, such as high value customers. The potential for fraud makes mass deployment too dangerous. By recognizing this in advance, financial institutions are attempting to avoid losses rather than dealing with them after they have occurred.

CCG Catalyst is a provider of strategic guidance for banks, credit unions, mortgage lenders, captive finance companies and other organizations within the financial industry. Visit www.ccg-catalyst.com.

SQN Tech Tips!
By Stan Jaslar, Chief Technology Officer

Have you ever wondered how many accounts you have saved in your SQN SENTRY: Signature system? You can check this out in the File/Statistics menu (Fig.1).  You will also get a summary of how many signatures and photo id's are stored in the system along with the amount of disk space currently being used. (Fig. 2)

(figure 1)

(figure 2)

    Have you ever wondered how many accounts you have on file are missing signatures? You can get this information by running the missing signature report from the Reports/missing signature menu (Fig 3).


  
(figure 3) 

 Have you ever wondered how many accounts you have on file are missing signatures? You can get this information by running the missing signature report by using the RepSQN Tech Tips!
By Stan Jaslar, Chief Technology Officer

Have you ever wondered how many accounts you have saved in your SQN SENTRY: Signature system? You can check this out in the File/Statistics menu (Fig.1).  You will also get a summary of how many signatures and photo id's are stored in the system along with the amount of disk space currently being used. (Fig. 2)



(figure 1)

(figure 2)

    Have you ever wondered how many accounts you have on file are missing signatures? You can get this information by running the missing signature report by using the Reports/missing signature menu item (Fig 3).