Fraud Prevention: How it helps protect your business – and beyond

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While we’d all like to assume that if we’re careful enough, that if we don’t share our personal information or credit card details with just ‘anyone,’ we’re somehow immune to fraud.

Well, nothing can be further from the truth. In the US alone, a staggering one in ten adults will fall victim to a scam or fraud every year – and more than 1 million children have their identities stolen every year.

Gone are the days of fraudulent activities lurking in dark corners or the dark web. We know that fraud prevention must consistently anticipate and proactively mitigate against evolving fraud patterns and behaviors. But how can organizations or individuals outsmart even the ‘smartest fraudsters’ if they’ve already slipped past frontline identity verification defenses?

Let’s take a closer look at fraud prevention, why it matters to organizations, and how businesses can proactively protect their customers with the right technology in place.

What is fraud prevention?

While fraud prevention may seem pretty obvious to some, for most of us, it’s anything but. We know it as the most important thing businesses are obligated to do, legally and ethically – to protect their customers from fraud and scams. Combating fraud before it occurs is vital to the survival of any business. Not only do businesses protect themselves and their customers from financial loss, but it’s also how they build and maintain customer trust and loyalty.

A complex and ongoing process, fraud prevention means identifying and preventing fraudulent activities ‘before’ they happen. It’s a combination of strategies, tools, and techniques, including identity verification, real-time transaction monitoring, sanctions screening, risk assessment, and more. We sometimes confuse fraud prevention with fraud detection, where prevention is proactive to avoid fraud, and detection is all about identifying fraud as it happens, on the premise of mitigating the risk, aka, finding a ‘cure.’ Some might even say that fraud detection jumps in when fraud prevention processes don’t work, hoping to save the day before irreparable damage is done.

Fraud goes far and wide. Some common examples include identity theft, account takeover, and payment fraud. It can also include more complex fraud, such as deep fakes, manipulating one person’s likeness with that of another; synthetic identity fraud, where criminals combine fake and authentic information to create a new identity; and swarm attacks, where cybercriminals use thousands of hijacked devices to attack an organization’s networks or devices, sharing information in real-time to perfect an attack as it happens.

A (brief) history of fraud prevention

Not all that long ago, to prevent fraud, businesses had to rely on what some seem archaic business rules and rudimentary analytics to hunt for system glitches or irregularities, create alerts, and for the most part, hope for the best. There was no surefire way to automate processes or cross-reference data, and organizations could not detect nor prevent fraud in real time because the adversary was already on the way to their next cyber breach.

But businesses today can’t afford to wait for a fraudster to strike. Organizations must be ready at the starting gate to keep pace with their fast-evolving techniques and exceedingly complex, unpredictable behaviors. Simply put, fraudsters need only win once to succeed, while fraud prevention needs to win every time, with no exceptions. This has caused businesses to not only wake up but to replace their legacy systems with automated processes powered by AI, and a newer, more powerful player, neural networks, an AI method that teaches computers to process data in a way inspired by the human brain.

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Get to know your fraudster

While we are not suggesting a meet and greet with a cybercriminal, an integral part of fraud prevention means putting strategies in place and managing a well-defined fraud prevention plan. To tackle threats head on, this plan must be flexible and customizable, to grow as your business grows, and to keep up with the ever-changing cyber landscape. One smart preventative measure is to know your fraudster and become familiar with their current tactics and better understand them so that you can predict and prevent fraud.

When it comes to safeguarding your business and protecting your users from financial fraud, knowing your customer (KYC) is key, such as verifying a customer’s identity and financial profile, screening customers against global sanctions and PEP watchlists, and maintaining compliance. Today’s KYC-regulated industries, Banking and Financial services, Crypto, Insurance, and Gaming, are now hard pressed by government and industry regulations to move from the ‘cure’ mindset of fraud detection to the ‘prevent’ mindset of ‘fraud mitigation.’

KYC regulations designed to protect customers from fraud, are a clear sign of just how sophisticated fraudster methods have become, such as the deep fakes, swarm attacks, and synthetic fraud mentioned earlier. But the challenge for KYC-regulated industries remains unchanged – it’s about balancing fraud prevention with the customer experience. In addition to being error-prone and arduous, manual processes nip the customer experience in the bud with lengthy processes to verify a person’s identity and ID documents, creating delays, onboarding friction, and high churn rates. Businesses intent on skirting the system or taking shortcuts run the risk of heavy fines and reputational loss.

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Protect your business from serious fraud

AU10TIX Serial Fraud Monitor is the only neural network fraud prevention platform of its kind used by financial institutions around the globe. It offers dual-layer protection by monitoring existing fraud patterns and behaviors and evolving patterns at the customer traffic level. Moreover, Serial Fraud Monitor enables organizations to identify and stop fraudulent customers, recognize customers that accumulate positive scores over time, and give them better service as trusted users.

Fraud prevention is critical for financial institutions and all businesses and organizations operating in a highly competitive and heavily regulated environment today. By implementing advanced fraud prevention processes, companies have more than a fighting chance – they can reduce financial losses, enhance compliance, boost customer trust and brand loyalty, and remain competitive.

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