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Paper Multi-layered approach can curb fraud
MIAMI (9/4/12)--Financial institutions must deploy multiple layers of protection to stay ahead of fraudsters, according to a new white paper from Compass Plus.

Compass Plus is a provider of retail banking software and electronic payments systems to financial institutions.

The financial services industry has undergone a transformation in the past 10 years, with consumers visiting branches less, according to the paper, The Rise and Fall of a Fraudulent Transaction. The Internet, mobile and self-service kiosks, including ATMs, now provide access to services at all times. This shift to online banking, e-commerce and mobile wallets has presented a new range of opportunities for criminals, and fraud has become a more pervasive global issue, says the paper.

When it comes to fraud, financial institutions, including credit unions, have to bear hidden costs, including loss of customer confidence and damage to their brand and integrity. In the white paper, Compass Plus outlines the various types of fraud prevalent today and the numerous layers of protection that can be used to combat them.

The paper outlines eight layers of protection:

  1. User authentication. For Internet banking and mobile banking, credit unions can use a number of increasingly sophisticated methods of user authentication, including virtual keyboards, dynamic passwords, hardware tokens, one-time passcodes and Visa Dynamic Passcode Authentication and MasterCard Chip Authentication Protocol.
  1. 3D secure and virtual cards. With 3D Secure member/customers must opt in, and will recognize 3D Secure in the Verified by Visa or MasterCard SecureCode authentication window that appears as part of an online transaction process. With virtual cards, a one-off 'card' is issued online or at an ATM, with disposable details. Usage parameters are set by the member/customer--these could include an expiration date and number of transactions allowed.
  1. Limits and customer notifications. Member/customer notifications via e-mail and text messaging can be used to alert a member to account activity. If that activity has not been initiated by the member, an instant call to the financial institution's fraud department will prevent further unauthorized transactions. Financial institutions can also also be able to set and revise usage limits.
  1. Transaction flow analysis. This is a methodology that compares the parameters of the current and previous transactions with statistical parameters. Each transaction is analyzed, based on rules and algorithms defined by the credit union/bank to detect suspicious transactions.
  1. Object behavior analysis. The statistical analysis of object activity, such as cards, and merchants, enables the tracking of changes in an object's behavior by analyzing its activity over a certain time to accumulate statistics.
  1. Internal access rights control. A system that controls internal access rights to sensitive information, requires permissions from more than one individual to access sensitive information, encrypts all data as a matter of course, and maintains automatic and detailed audit trails will provide a strong deterrent to anyone looking to perpetrate internal fraud.
  1. Payment card industry data security standards. Industry standards add an additional layer of security for financial institutions. In 2006, card companies formed the Payment Card Industry Security Standards Council, which mandates security standards for payment card processing and management.
  1. Europay-MasterCard-Visa. Physical card fraud--commonly known as skimming--has been reduced by the introduction of the EMV card, which has been widely implemented across Europe but not the U.S.
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