SQN's Fall 2010 Newsletter

Financial institutions continue to report that check fraud in branches is one of the most frequent security issues. According to a recent Business Data Breach Investigations Report - a collaboration between Verizon and the United States Secret Service - financial services is the most commonly breached industry, accounting for 85 percent of the 143 million records breached in 2009. Check fraud and transaction fraud is alarmingly widespread. The marriage of innovative technology and trained, informed employees is the best way to begin stopping fraudsters in their tracks... CHECK FRAUD Q & A: Industry Experts Discuss Fraud Mitigation Strategies
We asked three payments and banking industry experts to weigh in on leveraging technology to mitigate check and transaction fraud.

Bob Meara, Celent

Risk mitigation is enhanced when it is done at the point of presentment. For starters, doing so improves the likelihood of identifying a fraud suspect prior to posting. Remote deposit capture (RDC) is arguably making this even more important. Although there have been few incidences of losses attributed to RDC (88% of FIs reported no RDC related losses in a Celent survey conducted in September 2010), RDC accelerates loss mechanisms. And with clearing and settlement times advancing through image exchange, early detection is
becoming increasingly important. In addition, teller line suspect identification (should the FI elect) permits advising the customer that there may be a problem.

Vijay Balakrishnan, Stratex Consulting

Day Zero fraud detection is important because as we have electronified and moved things to the speed of light, so have the fraudsters. The traditional batch approach to fraud detection based on Day Two processes is a day late and many dollars short. Early detection means an opportunity to potentially nip fraud before it happens i.e., fraud prevention versus after the fact fraud detection and pursuit.

Stan Jaslar, SQN Banking Systems

One of the most effective lines of defense against check fraud is to stop the fraudulent item at the teller line before it enters the financial institution for processing. Once a bad check is posted the chances of recovering any losses from the item are low. With the newer imaging systems being implemented today the checks are imaged at the branches at the time of presentment. This is an excellent time for the image to be forwarded to a fraud analysis system so the teller can be alerted in real time if the item is questionable. These systems can alert a teller if the check has been altered, a signature has been forged, and if the particular check has previously been presented for payment.

Q: How important is it to have a "frontline fraud detection" strategy? Is it technology, training of employees or both?

Bob Meara, Celent

Risk mitigation is always a matter of both technology and training. This is particularly so when detection is moved from the back office to front line customer facing scenarios.

Vijay Balakrishnan, Stratex Consulting

While technology can detect potential fraud at the point of entry, the actions that an FI might take are dependent on both policy and training. There is a delicate balance between risk mitigation and customer service. Because there is no such thing as perfect technology, there is always the risk of false positives. Thus, depending on the institution, the response upon detection may be one of placing a hold on the deposit for further review as opposed to an outright rejection of the deposit. Thus, it is important to keep in mind that fraud
detection and follow through is not just about technology. Rather, it is a case of technology facilitating a reexamination of policy and training regimes.

Stan Jaslar, SQN Banking Systems

It is important to complement the technology available with a comprehensive fraud detection training program. A well thought-out approach using available technology and supported by fraud training can increase the likelihood that fraud losses will be minimized. This also helps ensure that the response to suspected fraud will be professional and the risk of mishandling a situation by an employee will be minimized.

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SQN Banking Systems Releases New Dashboard Module, Provides Real-time, Relevant Performance Information

SQN Banking Systems developed a customizable Dashboard Module to monitor real-time activities and productivity of both the system and its operators. This tool complements SQN Banking Systems´ SENTRY suite of fraud detection software. SQNs Dashboard Module is designed to be a frontline fraud detection tool, enabling a supervisor to observe in
real time the number of items processed with a possible fraud rating.

"The Dashboard Module is a dynamic data utility tool developed to provide a quick and effective fraud detection monitor of real time user activities," said Stan Jaslar, chief technology officer for SQN. "The graphic interface shows productivity levels to both system users and supervisors in a customizable range of information, per workstation."

The client application polls the performance status at regular intervals, giving an updated display of current statistics on an individual basis, as well as the system as a whole. The user can view several activities including exceptions, performance, and risk overviews. Data gauges provide a snapshot of all activity.

"Using the dashboard module for immediate reporting provides the supervisor an easy to read, real-time measurement," continued Jaslar.

For more than 25 years, SQN Banking Systems has provided integrated fraud detection and process improvement products for the financial industry, meeting the needs of financial institutions of all sizes. The SENTRY suite of products includes software for exception item processing, image fraud analysis, automated signature comparison, verification and display, transaction analysis and safe deposit operations management. More than 500 SQN customers have improved their earnings and reduced check fraud losses by as much as
84 percent with SENTRY. For more information, visit SQN´s Web site at www.sqnbankingsystems.com.
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Employee Spotlight
Introducing Frank Gatti, SQN Banking Systems Project Manager

Frank Gatti has been with SQN for more than 6 years and became Project Manager in November of 2007. He began his career as a teller for Sun National Bank in 2003. Currently, he is responsible for coordinating and managing the design, development, implementation and maintenance of systems for SQN customers.

According to Frank, his past experiences as a bank employee have always helped his work
at SQN, "Having been a frontline employee, I know the challenges our customers face
firsthand."

As a project manager, Gatti has the responsibility of working closely with SQN developers
and the bank project managers to ensure all business requirements are met and the
software is delivered in a timely manner. Additionally, Gatti installs the systems, trains the
customers and provides technical support when needed. Gatti also earned an M.S. in
Computer Science from New Jersey Institute of Technology in May of 2010.
"Innovation never stops at SQN and neither does learning. We are constantly analyzing
the market to look at new ways to help bankers protect their assets and the assets of their
customers.

As a longstanding member of the SQN team, Gatti appreciates the value of working with talented and qualified individuals and sees this as an advantage to providing IT excellence. "The people that I work with at SQN excel in their respective fields and their knowledge and expertise is outstanding. When you call on SQN, you get a real person talking to you about solutions that work. I´m happy to say that I´m just one of the many experts in
our space working for our customers.

SQN Tech Tips!
By Stan Jaslar, Chief Technology Officer

Have you ever visited the SQN Technical Support website (www.sqntechsupport.com)? If not, take some time to check it out. If you do not have a user ID and password, simply click on the link on the main page and everything you need will be sent to your inbox. Once logged in, you will find Frequently Asked Questions, technical documentation and users manuals, general product information and archived versions of the Tech Tips.