Flash Cards

Key Definitions

  • Fraud: An intentional act of criminal deception to obtain an unjust or illegal advantage.

Types of Fraud and Parties Involved

  • External Fraud: Committed by individuals outside of an organization (e.g., vendors, suppliers, customers, hackers).

  • Second-party Fraud: Involves individuals or entities collaborating with someone else to commit fraud.

Business Email Compromise

  • Definition: Sending a fake email impersonating an executive to trick staff into making urgent payments.

Types of Fraud Risk

  1. Financial

  2. Reputational

  3. Operational

  4. Regulatory

  5. Cybersecurity

Affected Areas of Operations

  • Fraud impacts three primary areas: Financial, reputational, and operational.

Managing Data Privacy

  • Organizations have a duty of care to protect data privacy by preventing unauthorized data access through strong access controls.

  • Legal obligation to store data securely governed under Regulation E.

Anti-Fraud Measures and Regulations

  • OLAF's Role: Independently investigates fraud, corruption, and other illegal activities.

  • UK Fraud Act: Establishes statutory definitions of three main fraud offenses.

  • Anti-fraud regulations shaped by local laws, cultural norms, and economic conditions.

Fraud Risk Management Framework

  • Purpose: Guide organizations in managing fraud risks effectively.

  • Includes reviews of internal fraud threats and promotion of whistleblower programs.

Stakeholders in Fraud Risk Management

  • Key stakeholders: Finance, compliance, IT, operational risk, legal.

  • Types of fraud risk assessments: Enterprise-wide, product risk, customer risk.

Transactional Fraud Risks

  • Process Mapping: Detects weaknesses in controls and workflows.

  • Types of transactional fraud risk: Customer, jurisdiction, product, channel.

Fraud Origin Types

  • Origination Fraud Risk: Related to fraudulent activities during customer onboarding or acquisition.

  • Seasonal Fraud Risk: Occurs when organizations relax fraud security against increased transactions.

Types of Fraud

  • First-party Transaction Fraud: Includes chargeback fraud, bust-out fraud, application fraud.

  • Friendly Fraud: Involves banks as victims and often stems from misunderstanding or misuse of policies.

Preventing Internal Fraud

  • Strong internal controls, such as regular audits, are essential to prevent fraud.

Employee Training and Awareness

  • Role-specific training helps employees recognize and respond to fraud. Methods include online education and collaboration with law enforcement.

Authentication Technologies

  • Examples: Multi-factor authentication (MFA), identity verification (IDVP), and electronic critical bank status verification (eCBSV).

Evidence and Investigations

  • Sources of credible evidence include internal data, transaction records, witness statements, intelligence alerts.

Investigation Protocols

  • Closing investigations requires thorough evidence, including documentation of findings and compliance with regulations.

Documenting Fraud Incidents

  • Report Structure: Should include allegations, inquiries, findings, and rationale. Net losses detail the financial impact.

Continuous Improvement and Response Planning

  • Analysis of fraud incidents is crucial to improve strategies and reduce future risks.

  • Establishing a fraud feedback loop helps to refine security measures.