Financial fraud is an intentional act by bad actors for personal gain. Or financial fraud is accomplished when a person you barely know deprives you of your money and harms your financial health using misleading, deceptive, or other illicit practices. Financial fraudsters are advancing their ways and using various methods to deceive an innocent person via identity theft or investment fraud.
As spoken about in global finance events like the Money 2.0 Conference, financial fraud has become a pivotal issue and not a mere subject of debate. It is essential for every individual, especially if you are connected to finances or business sectors, to understand the meaning of financial fraud, how it works and why it could be dreadful for your business. Fortunately, we have a few technologies that are not only useful in preventing fraudulent activities but also offer fantastic financial advice on the matter.
Before we dive into the new wave of technology that will stand by us and help us combat the minacious financial shocks, let’s learn what the names of a few infamous frauds are:
- Identity Theft
- Terrorist Financing
- Money Laundering
If you wish to learn more about these frauds prevalent in the financial sector, you might try registering for any post-COVID finance conferences held in Dubai. Now that you are aware of the types of fraud, it’s time to get acquainted with the various technologies willing to serve their purpose of preventing such scams from the root.
New Wave Of Technology To Combat Financial Frauds
The advent of technology has been a boon for humankind and successfully enhances industry collaboration. Artificial Intelligence, Machine learning, and data analytics are some examples of technological evolution and can facilitate the eradication of financial crime across the globe in real-time. However, when implemented in banks and other financial institutions, other technologies can improve data-sharing security systems between institutions.
Five proven technologies you must know about to avoid falling into the traps of the financial fraudsters-
Differential Privacy: In this technology, noise is added to a dataset to make it nearly impossible for the fraudsters to reverse-engineer the individual inputs.
Federated Analysis: Within the federated analysis, two or more parties can share the insights from the study of their data without sharing any confidential information.
Homomorphic Encryption: With homomorphic encryption, data is encrypted before sharing to be easily analyzed without decoding any factual information.
Zero-Knowledge Proofs: Zero-knowledge proofs allow users to prove their knowledge of any particular value without revealing its original value.
Secure Multi-Party Computations: Data analysis is spread across multiple parties such that no individual party can see the complete set of inputs.
When a financial institution or a bank uses these technologies separately or in combination, they can experience fewer financial privacy risks. These technologies– whether used together or individually– can:
- Better dig up and combat fraudulent activities inside and outside the organization. For instance, federated analysis can be used in modeling fraud prevention and detection techniques without revealing consumer-sensitive information.
- Identify wide-ranging risks to prevent a financial crisis. Like the secure multi-party computation technology can be used to provide an analytical outcome on the institutions’ risk exposure without getting too deep into the institutional credentials.
- Provide new forms of tailored advice digitally. For example, implementing differential privacy to analyze the consumers’ transactions inside an institution offers sophisticated and focused suggestions, e.g., people like your suggestions, without breaching the privacy of any particular customers’ purchasing patterns.
As discussed by finance and insurance experts at the finance events in Dubai, there can be other ways to help tackle financial fraud starting from the root. Let’s take a look at some of the non-technical ways of preventing it-
Financial institutions can play the role of whistleblowers as they are responsible for keeping track and collecting all the secretive data. They have the authority to detect and verify all the customers’ credentials, making it easier for them to identify which customer is genuine and which is in any conspiracy or criminalization. There are several proven methods using which a financial institution can effectively stop the spread of fraud like:
- They can conduct risk assessments to gather a better understanding of the threatening environment; these assessments can be based on a bank’s products, services, and client details.
- They can try applying advanced analytics to monitor a 360-degree view of threats and what’s causing them; it helps reduce redundancies and uncover complex threats in their emergence state.
- They can foster a high ethic culture and standard, establish policies and work closely with its regulators.
Financial institutions can improve the quality and availability of the existing data to encourage seamless transactions and advanced analytics.
The customer principle is a crucial component in upholding the duties to avoid financial fraud. Long-term business ties with their clients need a lot of time, which makes it much easier for banks to identify and stop financial fraud. Additionally, all credit institutions identify the real owners of each contract. These are the actual people who gain significantly from a commercial partnership. This strategy is used in many nations where banking supervision law does not yet guarantee this degree of caution.
With regular training and other precautions, one may guarantee their personnel that they can recognize the risk of financial crimes at all times while comprehending and implementing current legislation on client protection.
Now you know about financial frauds, how bad actors execute them, and what is the role of technology in standing up against them. Financial criminals tend to stay several steps ahead of the workers, but having such constructive technological variations by your side can make a big difference and help you maintain a safe distance from such fraudulent activities.
But there are still some undiscovered technologies that are yet to be unraveled and can be used to decrease the effects of financial crimes or eliminate them for good! Many technology-deprived countries need to pace up and embrace the new change led by promising technologies. If you are worried about losing everything to financial fraudsters, try attending an economic conference like the Money 2.0 Conference (Money2Conf) to gain a wealth of awareness and stay ahead in the game!