Frauds in Financial Institutions and How Technology is doing an amazing job in preventing them?

The banks and other financial institutions reported frauds worth Rs 1.38 trillion in 2020-21 and Rs 1.85 trillion in 2019-20, according to the reports released by the Reserve Bank of India (RBI).

In 2019-20, RBI reported Rs 1.85 lakh crore frauds in banks alone and with over Rs 71,500 crore in 2019-18.

So the real question arises what are the types of these frauds? And how they are happening despite the Reserve Bank of India's (RBI's) strict norms and supervision?

RBI has classified these frauds as under:
Misappropriation and criminal breach of trust.
Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.
Unauthorized credit facilities extended for reward or for illegal gratification.
Negligence and cash shortages .
Cheating And Forgery.
Irregularities In Foreign Exchange Transactions.
Any Other Type Of Fraud Not Coming Under The Specific Heads As Above.
Technological Backwardness And Fraud
Let's face it --India isn't exactly on par with what we'd call a highly technologically advanced country. From a global standpoint, it's one of those countries which has a lot to learn from others, especially when you consider how popular scams and frauds have become these days.
There are other reasons why frauds are still happening but technological backwardness is the most relevant and the updated on.
Over-reliance on external and internal manual monitoring makes it impossible to manually control and monitor the huge transaction volume. Also, with the advancement of technology, banks and other financial instiutions are facing tremendous pressure. Emerging customers, that is, young people in the Timely technical upgrades of various functions have become inevitable. The data protection and security issues of e-banking must also be considered.
How technology can help prevent frauds ?
Technology provides a lot more convenience, efficiency, and flexibility for customers; but it also introduces new securities to prevent frauds.
Let's look at some of these technological processes which can be used to prevent oo atleast minimize fraud.
Advanced Analytics --It is imperative that you monitor and analyze all data pertaining to your customer's dealings with your business, including purchases and deposits. If there's an anomaly in any part of their transaction, flag can be enough to head off a massive fraud before it begins. Technology has made it possible for businesses to watch every cent, monitoring your customers' activity will help you keep them safe from fraud. history or spending habits with the help of Artificial Intelligence (AI) and Machine Learning (ML) it can be detected. Catching it early may save from financial ruin and prevent further damage to your business.
Data Driven Decisons --According to a recent report, banking frauds and cyber crimes cost Indian economy more than $ 6 billion every year. Big banks have recently been targeted by organized banking fraudsters who employ advanced techniques to execute fraudulent activities. But, if you know what to look for, there are many tell-tale signs which will alert you when your bank is falling prey to such frauds. Thus, following a step of data and the ability to manage and utilize big data will be helpful to prevent frauds. The times We're living in offer great opportunities but they also present new challenges that require constant vigilance and adaptability.
While you can't always prevent a scam or fraud from happening, you can always take steps to minimize its impact on you—and protect yourself from further attacks.
Fraud detection system --These days, everything from your bank balance to your social media activity is at risk from cybercriminals. In order to keep your financial information safe, it's critical to be vigilant about security and take a data-driven approach to fraud detection. Implementing a fraud detection is simple and cost-effective. With the help of predictive analytics frauds are detected using tools and softwares. The detection software also detects fraud across multiple channels involved in payment processing.
Automation is the key --Banks are implementing automation solutions to prevent frauds. Automation can help banks evaluate potential risks before they occur. Instead of trying to process thousands of transactions at once, an automated platform learns patterns over time and increases scrutiny for transactions it identifies This approach puts money back into your account more quickly and ensures funds aren't frozen unnecessarily. It also cuts down on high staffing costs associated with manual anti-fraud measures like face-to-face checks or lengthy phone conversations to confirm identities and ensure accounts haven't been hijacked by fraudsters using spoofing tactics.
With banks struggling to prevent fraud and cyber-attacks, it's not surprising that there are other solutions on offer to help institutions deal with these challenges. Increasing levels of automation are likely to be an essential part of any future fraud prevention strategies.
Structured Security process --Technology helps recognize customers and protect against malicious users across all channels. It helps organizations seamlessly establish identity trust across the omnichannel customer journey. Through biometrics and intelligence, backed by AI and machine learning, Security systems can provide a holistic approach to identifying new and existing customers, without negatively impacting user experience.
Conclusion .
It would always be smart to stay up-to-date with the technological changes and use an efficient management system empowered with Artificial Intelligence (AI) and Machine Learning (ML) to deal with big data followed with a robust analytics system.