Fraud Detection Systems

The first thing that we need to ask ourselves is whether there is a better way to detect financial frauds. The fraud detection systems that we have in place are limited not in their capability but limited in the way it is implemented. What we have learned from the recent cases like Madoff and Standford Bank is that the person who is supposed to be the custodian or guardian of the funds is the one committing the crime. There have been severe lapses of governance and oversight in such instances. These kind of frauds are the hardest to track.

Most fraud detection systems and the surveillance systems are able to track and monitor activities of bankers, traders and advisors. Today, we can track almost anything from churn activities to money laundering to financial frauds.

We have systems that can track by activities, by advisor or trader, by client, by phone number, or by address to name a few. In other words, we are able to cross reference trades to make sure that any spike in account activity between related parties can be tracked immediately.

The only drawback is the resistance that we face from the users and the clients - they feel that their privacy is being invaded.