Bank’s battle against insider frauds ignitors and mitigators: an emerging nation experience

Abstract

Purpose Banks are exposed to many challenges to name a few i.e. growing market competition, political environment, market forces of demand and supply, technological changes, frauds and poor management. The banking sector devasted experiences of fraud have impacted all facets of the Banking, Financial Services and Insurance. In continuation, this study aims to revolve around themes of different types of frauds, especially insider frauds that have gained mainstream attention in recent major value fraud events with prominent Indian banks. This study will identify the types and drivers of insider frauds. Design/methodology/approach The methodology opted for the study is through confidential primary survey and focused group discussion with risk officers of banks who are associated with Indian banks for more than three years, further to understand the relation between type of Insider frauds and originating drivers were paired based on the principal component analysis. Findings Finally, the paper concludes with the conceptual mitigation framework for different types of insider fraud and driver pairs within the scope of this paper. This paper thought will support policymakers of the Indian banking system to create a more robust environment within the banking system via timely detection of frauds so that up to an extent it can be squared before it appears. Originality/value The study is innovative in the area of banks’ internal fraud management, where original data collected through a primary survey contributes to the conclusion of fraud management for various Indian banks.

Sustainable response system building against insider-led cyber frauds in banking sector: a machine learning approach

“…In the USA and Nigerian banks, scholars (Okoye and Gbegi, 2013; Ramamoorti, 2008) examined how poor internal control, poor cyber security and poor corporate governance practices affected profitability. Researchers (Roy and Basu, 2021; Uchenna and Agbo, 2013) found that employees exploited loopholes in the infrastructure, technology, database and communication systems to commit crimes in Nigeria and Kenya. Some studies (Çetinkaya and Damar, 2019) found that social and political pressures, easy escape policies, weak internal control systems and inadequate supervision work as pull factors for employees to commit fraud.…”

“…In banks, the least secure encryption system serves as an easy target for fraudsters. An inefficient IT control system is another fraud enabler (Roy and Basu, 2021). Poor internal control measures can sometimes result in criminal activities going undetected for 12 months and even five years (Van Akkeren and Buckby, 2017).…”

Internal-led cyber frauds in Indian banks: an effective machine learning–based defense system to fraud detection, prioritization and prevention

“…Banks manage the dynamically rising digital disruptions that prevent emerging nation banks from adhering to standard best practices (International Finance Corporate, 2021). Some of the challenges are stability (Batten et al, 2017), reputation and risk management (Ketterer, 2017;Roy and Basu, 2021a). Cyber-attacks are the most significant challenge among all technological disruptions that affect the banking business (Chhabra and Viswanathan, 2020;Roy and Vishwanathan, 2018;Touri, 2009) around its reputation, sustainability and stability (Thompson et al, 2017).…”

“…They identified that fraud could happen because of either party involvedthe victim or the criminal. The authors of recent studies (Blass and Grossman, 1996;Eaton and Korach, 2016;Najafabadi et al, 2015;Resnik and Finn, 2018;Roy and Basu, 2021a) believe that investigations should focus on involved parties since both are internal to the fraud and can be easily monitored and controlled (Swaby, 2012). As part of the root-cause analysis, both the victim (bank) and the fraudster (an insider employee in this case) provide reasons for the fraud.…”

“…Cyber fraud studies (Feily et al, 2009;Tamrin et al, 2017;Swaby, 2012) observed that criminals could exploit banks and perpetuate such crimes if they are internal systems entities that act as organized and well-connected communities. Previous studies (Roy and Prabhakaran, 2022;Roy and Basu, 2021a) focused on generic mitigation solutions that were less cost-effective for stakeholders. As cyber frauds continue to threaten the banking ecosystem, a more sophisticated, innovative and persuasive vigilance approach against the traditional silobased monitoring system is necessary to combat the dynamic cyber threat in the banking ecosystem.…”