Anti-fraud system - countering fraud

Advanced technologies known as Fraud Prevention Systems (Anti-Fraud Systems) allow companies to effectively detect and prevent fraudulent activities. By analysing transaction patterns and anomalies in real time, anti-fraud services provide reliable protection against fraud, thereby increasing security and customer confidence in a company.

In May 2023, the National Bank of Ukraine approved the "Regulation on Authentication and Application of Enhanced Authentication in the Payment Market" due to the need to harmonise Ukrainian legislation with that of the European Union and under the Law of Ukraine "On Payment Services."

The document requires all payment service providers to implement enhanced user authentication when accessing accounts remotely, conducting remote payment transactions, and in cases of suspected fraud.

Additionally, the NBU requires payment service providers to implement mechanisms and procedures to detect unauthorised or fraudulent activities that consider a significant number of risk factors and strengthen the security of payment transactions.

Therefore, payment service providers must take measures to detect fraud in the early stages of the process.

One of the leaders in this area is IBM Safer Payments, a solution that allows banks to respond effectively to fraudulent threats.

Challenges Facing Payment Service Providers and IBM Safer Payments Solutions

Payment service providers face significant daily challenges in ensuring the security, compliance, and technological resilience of their systems. These challenges include:

• Uncertainty of regulatory requirements. The lack of clearly defined standards for transaction control makes it difficult to implement effective security mechanisms.

How IBM Safer Payments solves it:

The system allows you to quickly adapt to changes in the regulatory environment due to its flexible configuration of fraud detection rules and policies. Users can update control mechanisms quickly by new requirements, eliminating the need for large-scale rewriting of system code.

• Difficult integration of verification mechanisms. Many payment systems run on outdated software that does not support modern transaction verification methods.

How IBM Safer Payments solves it:

Thanks to its open architecture and cross-platform compatibility, the solution can easily integrate into complex or legacy IT landscapes. This allows you to seamlessly connect external data sources and apply real-time verification.

• Shortage of qualified personnel. The shortage of specialists who can implement and maintain complex anti-fraud systems is a widespread problem.

How IBM Safer Payments solves it:

The intuitive user interface lowers the entry threshold for new employees. Additionally, automating many processes (e.g., testing new rules or analysing efficiency) enables the team to concentrate on strategic tasks.

• Limited time for implementation. Market conditions force payment service providers to react quickly and launch solutions with minimal delays.

How IBM Safer Payments solves it:

The system's modular architecture and preconfigured fraud detection scenarios allow for rapid deployment. This significantly reduces the time it takes to fully launch the solution.

IBM Safer Payments is a strategic solution that addresses key technological and organisational pain points for payment service providers, not just software. Its effectiveness has been proven in real-world conditions in different countries with different types of transactions and risks.

Solidity has extensive experience implementing IBM Safer Payments in Ukraine and abroad. Our projects demonstrate the successful deployment of the system, even in complex environments requiring rapid adaptation, high reliability, and regulatory compliance.

WHY CHOOSE OUR SOLUTION?

• Implementation without interrupting business. The solution based on IBM Safer Payments from Solidity allows customers to implement an anti-fraud protection system without interrupting the operation of payment services.
• Recognised market leader with international certification. IBM Safer Payments is one of the best solutions in the global anti-fraud market and is certified according to PCI-DSS and PSD2 standards. It has also implemented projects in Ukraine.
• Flexibility and independence in management. The system allows you to maintain it independently, without the intervention of the manufacturer or contractor, as well as create new rules and audit the anti-fraud system in a graphical interface.
• Comprehensive protection and technical support. The main functions of our anti-fraud system include real-time transaction monitoring, anomaly detection, and automated risk assessment, which provide comprehensive protection against fraudulent activities. In addition, using IT outsourcing and IT services can simplify the deployment and maintenance process, ensuring that your internal team can focus on core business functions while experts handle the technical aspects.

By following our steps, the Solidity IBM Safer Payments solution will equip your organisation with a robust, adaptable fraud prevention system that provides continuous protection against fraudulent activity.

FRAUD PRECONDITIONS

These are the underlying conditions or factors that create an environment where fraud is likely to occur. These conditions can be divided into three main groups: opportunity, pressure, and rationalisation. Understanding these preconditions is important for organisations to develop effective fraud prevention strategies using anti-fraud systems.

1. Opportunity. It arises when there are weaknesses or gaps in an organisation's internal controls, processes, or systems that individuals seeking to commit fraud can exploit. These opportunities may include inadequate segregation of duties, lack of supervision, or insufficient access controls. Implementing an anti-fraud service can help identify and close these gaps.
2. Pressure. Individuals may be motivated or pressured to commit fraud for personal or professional reasons. Financial pressures, such as debt or lifestyle demands, or professional pressures, such as meeting targets or ensuring job security, can push people to commit fraud. An anti-fraud system allows you to quickly identify suspicious transactions, thus reducing the risk of fraud.
3. Rationalisation. This is when a person justifies their fraudulent behaviour. They may justify their actions as necessary, harmless, or justified under certain circumstances. Common rationalisations include believing that they are simply borrowing money, believing that the organisation can afford the loss, and feeling underestimated or treated unfairly. Auditing anti-fraud systems helps identify such cases and minimise their impact.

Organisations can implement robust measures to prevent fraud by recognising and addressing these preconditions. These measures can include strengthening internal controls, promoting ethical behaviour, conducting fraud awareness training, and developing a clear anti-fraud policy. IBM API Connect eliminates the preconditions for fraud by providing secure, controlled, and efficient API management.

Organisations can significantly reduce the risk of fraud and maintain a safe and secure environment by implementing anti-fraud systems and continuously auditing them.

Now, let's examine a real-world example of IBM Safer Payments in action.

How IBM Safer Payments transformed fraud management at the Bank of New Zealand

The Bank of New Zealand (BNZ) has a longstanding reputation for its high standards in financial fraud prevention. Before implementing IBM Safer Payments, BNZ was already successfully blocking approximately 75% of fraudulent transactions, achieving one of the lowest false positive rates in the region (1:5 versus an average of 1:12).

However, to reduce false positives and further strengthen customer protection, BNZ integrated IBM Safer Payments. Within a few months of launching the system, significant improvements were evident:

• The false positive rate dropped by 77%, reaching an impressive 1:1.15.
• Fraud detection accuracy increased by 12%, with the potential to reach 90% coverage of detected attacks.

IBM Safer Payments is unique in its combination of financial and non-financial data, including the customer's transaction history. This enables the bank to detect fraud more accurately and remain compliant with international standards. It also allows the bank to scale the solution and adapt to growing business needs.

Currently, the system safeguards over 1.2 million BNZ customers, ensuring the seamless operation of the payment infrastructure without compromising the user experience. This example confirms that AI/ML-based technologies can bring financial security to a new level.

With its practical experience in implementing IBM Safer Payments, Solidity is a reliable partner for financial institutions seeking to maximise protection against fraud for their customers.