In the evolving landscape of financial crime, financial institutions need to intensify their scrutiny of transactions from entities with a long history of incorporation but sporadic or recent activity. This increased vigilance aims to detect and thwart potential account takeover fraud within savings accounts, ensuring the safety and integrity of financial systems.
Given below is a typology from Tookitaki's AFC Ecosystem. It details how to ensure your monitoring system triggers alerts transactions from entities with a long history of incorporation
Understanding the Typology
Setting Up Entity Historical Profiles
Financial institutions employ a function known as the "Incorporation Date of the Entity" to track and record the incorporation dates and transaction activities of entities. This function helps identify entities that have been established long ago but have shown recent or sudden transaction activities, which could be indicative of fraud.
Function Configuration and Data Aggregation
- Aggregate Fields: The system aggregates data on 'sender incorporation date' and 'receiver incorporation date.'
- Aggregate Function: Using the collect_set function, the system compiles a unique set of incorporation dates for each sender and receiver, providing a comprehensive historical perspective of each entity's transaction timeline.
- Group By: Transactions are grouped by unique identifiers like 'sender_hashcode' and 'receiver_hashcode,' linking each entity’s transaction history to specific account profiles.
Monitoring and Anomaly Detection
The system continuously monitors the transaction activities of these entities, comparing current transactions against historical data. Entities that have shown no or minimal transaction activities for a significant period since their incorporation are closely watched. A sudden spike in transactions, especially those of significant volume or frequency, triggers an alert. This scrutiny is particularly heightened if the entity's previous activity has been minimal or non-existent for years.
Flagging and Review Process
Transactions involving long-dormant entities resuming activity are flagged as high-risk. These flagged transactions undergo a detailed review to ascertain the legitimacy of the activity and to rule out any potential account takeover or other fraudulent intentions.
Investigative Measures
For flagged transactions, financial institutions conduct thorough investigations involving:
- Background Checks: Verifying the entity's background.
- Transaction Legitimacy: Confirming the legitimacy of the transaction.
- Entity Ownership: Ensuring the entity's ownership and operational status.
Preventative Actions and Customer Interaction
If fraudulent activity is confirmed, financial institutions take immediate steps to:
- Block further transactions.
- Secure the affected accounts.
- Possibly reverse fraudulent transactions.
- Contact entity representatives for further clarification and to ensure all parties are informed of the situation.
Compliance and Reporting Obligations
All suspicious activities are documented and reported in compliance with regulatory requirements. This ensures that the institution remains compliant with anti-fraud regulations and aids in broader efforts to combat financial crime.
Enhancement of Monitoring Systems
Based on findings and trends observed from monitoring these entities, financial institutions continually refine their detection algorithms and update their monitoring systems to better identify and prevent potential fraud.
By closely monitoring the activities of entities incorporated long ago but recently active, banks can effectively spot unusual patterns that may indicate fraudulent activities, such as account takeovers. This proactive approach helps safeguard customer assets and maintain the integrity of the financial system.
Final Thoughts
Financial institutions must remain vigilant and proactive in monitoring and analyzing transaction activities, especially those involving historically dormant entities. This typology, sourced from Tookitaki's AFC Ecosystem, highlights the importance of advanced monitoring techniques in detecting potential fraud.
We encourage anti-financial crime professionals to join the AFC Ecosystem to access unique typologies and leverage community-driven insights for enhanced fraud detection and prevention. Together, we can strengthen our defenses against financial crime and protect the integrity of our financial systems.
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