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Employee Fraud

August 27 2007 - Recent research has found that more than half of 40 major financial institutions surveyed in the United States and the United Kingdom have been the victims of organized crime, 85 per cent have experienced employee fraud and 65 per cent consider this an increasing problem. More than 50 per cent believe that a significant proportion of employee fraud is going undetected and cite increased access to technology and poor hiring/screening practices as the main contributory factors.

The survey by Actimize, a leading provider of transactional risk management software, together with Infoserve, also found that more than three-quarters of respondents report that employee fraud is becoming more sophisticated and 73 per cent rate the industry's readiness to address the problem as "poor to somewhat acceptable".

Of those able to answer the question, 50 per cent said they had been the victim of data theft in the last 12 months. The largest fraud experienced in the last five years averaged US$874 961, while the single largest theft reported was US$6 million. Fewer than half of respondents were using automated tools or more sophisticated data mining technology.

The survey found that employee fraud in financial institutions covers a broad range including self-dealing, skimming, data-theft, embezzlement and collusion resulting in theft of data and customer and bank funds. Levels of detection preparedness varied for each activity. For example, 28 per cent of respondents were completely unprepared to address identity shielding (when one person uses other employees' data to avoid detection).

Nearly 70 per cent of respondents said that government regulations regarding employee access to customer data would hinder their ability to address employee fraud. They ranked data availability, general resource priorities and availability of tools as the three biggest challenges in dealing with the threat. The top internal barriers were limited technology infrastructure and failure to understand the extent of the problem.

Amir Orad, executive vice president and chief marketing officer of Actimize said:

"Financial institutions have been aware of employee fraud and have been fighting the problem for years. However, with increased employee access to information and the growing sophistication of employee fraud, financial institutions are losing millions of dollars each year as insiders develop new and innovative fraud techniques to continue stealing from their organizations. Proper employee fraud detection technology, infrastructure and tools need to be implemented by financial institutions, in addition to proactive screening and reactive investigations, to safeguard their assets and retain customer loyalty."



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