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Fraud and Financial Crime 2020: Child ID Theft and More

Like most, I started off the new year with a multitude of resolutions, and almost immediately followed that with inevitable procrastination. But I’m not going to let that keep me down. I am going to keep looking forward – especially when it comes to 2020 predictions for fraud and financial crime. This year my brilliant colleagues – Doug Clare, Frank Holzenthal, and TJ Horan - made insightful predictions that I’d like to both amplify and build on. Enjoy and happy 2020!

Identity Theft Demands Self-Advocacy

We all know that fraud can happen to you or your loved ones, but what 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.

Did you know that more than 1 million American children were victims of identity fraud in 2017 – and the damage included $2.6 billion in losses and more than $540 million in out-of-pocket costs for families? Self-advocacy in a world of fraud is critical, and for busineses – a part of protection is teaching your customers how to advocate for themselves.

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.

AML Gets Integrated

A better question may be: why have fraud and financial crimes used siloed technology for so long? There is an estimated 85% overlap in the technology used by fraud and financial crime compliance teams. Whether it’s fraud or money laundering, the steps in identifying these activities are the same: customer authentication, monitoring transactions and detecting suspicious behaviors or anomalies, and appropriately responding to these risks.

My colleague, Frank Holzenthal, wrote about how financial institutions are converging AML and fraud detection systems. The result: lowered cost and improved results. Not only are crime pathways converging, but at many financial institutions, AML is next on the list for integration. With a more holistic approach, banks will streamline processes and improve customer experience.

Fraud and Financial Crime Convergence Gets Real

Doug Clare recently shared how he’s feeling a sense of déjà vu in his 2020 predictions. And I have to say, I agree. However, everything is starting to feel a bit more real. We are truly seeing fraud and compliance infrastructures converging. In fact, eKYC has become a top priority for both fraud and financial crime leaders. Asia is leading the way, with a keen focus on easing the friction of customer experience, reducing identity theft, and creating effiencies for tremendous back-office savings.

And the use of artificial intelligence and machine learning is expanding. As reported in the Wall Street Journal, FICO is playing a signifcant role. FICO Identity Proofing and FICO Authentication Suite give consumers exactly what they have been searching for – the perfect balance between a frictionless and secure experience. Powered by AI and machine learning, the use cases for this technology includes AML compliance - such as eKYC - but extend to the fraud domain as well to meet Strong Customer Authentication standards such as those required by PSD2 in Europe.

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. In the next two years, biometrics will be table stakes, and a critical add to the layer controls provided by multifactor authentication. The tech will be critical to Strong Customer Authentication, with the earliest adoption in mobile channels.

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. “Authentication software is a multibillion-dollar market,” said David Mahdi, a senior research director at Gartner Inc. “But FICO might have an edge with financial institutions given its relationships in that sector.”

Follow me on Twitter @LizFightsFraud to keep up with my thoughts on a wide range of fraud topics. 

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