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© 2019 Fair Isaac Corporation. All rights reserved.
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Fraud Protection & Compliance
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
© 2020 Fair Isaac Corporation. All rights reserved.
© 2020 Fair Isaac Corporation. All rights reserved. 2
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
Fraud Protection & Compliance
Cyber, Fraud, Compliance Predictions in 2020 — the 2020 trends in TPRM, AI and convergence spark déjà vu
Doug Clare, Vice President of Fraud, Financial Crime, and Cyber Risk Product
It could happen to you — our need for speed combined with criminals’ craftiness makes it easier to trick us into fraudulent payments
TJ Horan, VP of Fraud Product
More AI and Robots — the key to reducing false positives while detecting more money laundering and other financial crimes is to radically improve detection
Frank Holzenthal, Senior Director of AML Consulting
Fraud and Financial Crime 2020: Stop child ID theft and use biometrics to your advantage
Liz Lasher, Vice President of Fraud, Financial Crime, and Cyber Risk Portfolio Marketing
2019 was a year of new fraud, cybersecurity and money laundering challenges — and new technology to face them head on. We learned that 25% of organizations plan to adopt AI and machine learning to detect fraud in the next two years, which represents a 200% increase over the previous year. Criminals may be agile, but smart analytics help businesses be stronger, faster, and more innovative in how we fight the bad guys. What do we expect to see in 2020? We asked four experts at FICO to put a stake in the ground and predict the future.
© 2020 Fair Isaac Corporation. All rights reserved. 3
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
Fraud Protection & Compliance
Doug ClareVice President of Fraud, Financial Crime, and Cyber Risk Product
As Head of Product for FICO’s Fraud, Financial Crime, and Cyber Risk business, Doug has over 30 years of experience helping businesses manage fraud, risk and the customer experience.
Cyber, Fraud, Compliance Predictions in 2020 — the 2020 trends in TPRM, AI and convergence spark déjà vu
In 2020, my predictions include the standardization of analytically derived third party risk management (TPRM) in cybersecurity, the long awaited convergence of fraud and AML compliance functions, and the adoption of AI to fight financial crimes.
In 2019 FICO teamed up with the U.S. Chamber of Commerce to spread the word about our joint Assessment of Business Cybersecurity. Nearly 1,000 organizations leverage FICO Cyber Risk Score to drive conversation about cyber risk and third party risk management. In 2020 I expect that growth to accelerate, in particular driven by regulatory intensification we have observed on companies’ liability for data breaches stemming from third party vendors.
In November, we learned at FICO World that the capabilities of fraud and anti–money laundering (AML) systems have about an 80% overlap. This convergence is being pushed forward by a FinCEN directive, with consultants such as McKinsey & Co. noting the “incredible windfall when institutions switch from legacy ad-hoc financial crime compliance collaboration to full counter-crime team integration — a move that comes with a variety of intelligence, risk and resource benefits.”
While more institutions will put a toe in the water with a converged infrastructure, even if they’re not yet converging their processes yet. As they prepare for that future, I predict we will also see the adoption of machine learning and AI — stalwarts of fraud detection — adopted to complement the traditionally rules-driven approaches taken in AML functions.
Want to learn more? Check out my full 2020 predictions blog here and follow me on Twitter @dougoclare.
© 2020 Fair Isaac Corporation. All rights reserved. 4
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
Fraud Protection & Compliance
TJ HoranVice President of Fraud Product Management
TJ, Vice President of Fraud Product Management, is responsible for developing the strategic direction for FICO’s fraud products.
It could happen to you — our need for speed combined with criminals’ craftiness makes it easier to trick us into fraudulent payments
My fraud predictions are driven by two factors that I believe will crash into each other in 2020 and dramatically ramp up scammers’ success:
• Fraudsters are getting incredibly good at duping their victims, who range from the elderly to professionals and government officials.
• Consumers are conditioned to want every digital interaction to be fast, faster, fastest. As one of Amazon’s 105 million Prime members, I must confess to ordering items in less than one second with one-click purchasing. As a corollary to this speed, we have vested outsized amounts of trust in most or all of the companies we do business with online.
Even the most aware and astute consumers can unwittingly give fraudsters financial credentials. You can get the wrong email or wrong urgent text message on your phone, log in with your password, and do whatever you’re instructed. Only then will you realize that you’ve logged into the wrong place and provided the wrong information.
One of the most popular FICO blogs is Sarah Rutherford’s “What is Authorised Push Payment Fraud?” which describes how fraudsters deceive consumers or individuals at a business to send payment under false pretenses, to a bank account controlled by the fraudster. As payments made using real-time payment schemes are irrevocable, the victims cannot reverse a payment once they realize they have been conned. Notably, authorized push payment fraud was up 44% in the UK in 2018, a huge leap.
Until now, these kinds of modern horror stories were things that happened to friends of friends. In 2020, it could happen to you.
Stay safe in your mobile world. More than anything, I want my 2020 fraud prediction to be wrong. Follow me on
Twitter @FraudBird.
© 2020 Fair Isaac Corporation. All rights reserved. 5
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
Fraud Protection & Compliance
Frank HolzenthalSenior Director of AML Compliance Solutions Consulting
Frank is Senior Director of AML Compliance Solutions Consulting at FICO, a CAMS Certified AML Specialist, and leads the consulting team for FICO’s AML compliance solutions.
More AI and Robots — the key to reducing false positives while detecting more money laundering and other financial crimes is to radically improve detection
Behind the headlines on financial crime compliance are big challenges. Here’s what we see for next year: More AI, More Robots, and the convergence of fraud and financial crime management.
We see a trend and a mind shift of regulators which will help financial institutions. Regulators are more open to new methods like the use of AI (artificial intelligence), machine learning and robotics to drive efficiency. In fact, they are actively encouraging banks to consider, evaluate and, where appropriate, implement these innovative technologies. This trend does not mean we throw away the existing risk-based approach. What we see is a co-existence — a hybrid of the existing scenarios and the AI mechanisms, which will help prioritizing alerts and quickly adopting on new money laundering schemes.
Financial institutions will also look to lower costs and improve results next year through the convergence of AML and fraud detection. The systems used today for these functions are similar and fulfil many common requirements, such as detecting unusual behavior — but banks still operate them in a siloed manner. In their recent survey Ovum found that more than 80% of financial institutions want to achieve the goal of breaking down the siloes from an organizational point of view within the next 8 years.
Want to learn more? View my full blog here.
© 2020 Fair Isaac Corporation. All rights reserved. 6
FICO‘s 2020 Predictions for Fraud, Financial Crimes, and Cyber Risk
Fraud Protection & Compliance
Liz LasherVice President of Fraud, Financial Crime, and Cyber Risk Portfolio Marketing
As Vice President of Fraud, AML, and Cyber Risk Portfolio Marketing at FICO, Liz brings extensive experience in leveraging innovative technology to mitigate fraud and financial crime.
Fraud and Financial Crime 2020: Stop child ID theft and use biometrics to your advantage
Identity Theft Demands Self-Advocacy: We all know that fraud can happen to you or your loved ones, but what we should we be doing to advocate and protect ourselves? My colleague, TJ Horan, recently blogged about his predictions regarding the very real threat of identity theft for consumers in 2020. I could not agree more. In fact, this past November at FICO World, I dug into the topic of one of the most dangerous and least suspecting fraud schemes — child identity theft. If you want to learn more about how to protect your kids, watch my talk here and don’t forget to check out these other tips from Alexandria White at CNBC Select on protecting yourself from fraud.
Biometrics Become Table Stakes
What else can we expect for the future? Well, Gartner reports that identity proofing and corroboration are at peak levels of adoption for transformational innovation in identity and access management. They also point out that banks are moving towards a single platform for both identity proofing and user authentication: “Banks are increasingly interested … some have implemented integrated tools from a single vendor such as … FICO [which supports] a range of biometric modes supporting user authentication.” Most device-native biometric methods have limitations compared to independent biometric methods like the ones FICO offers.
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Want to learn more? Read my full predictions here and follow me on Twitter @LizFightsFraud to keep up with my
thoughts on a wide range of fraud topics.