How Forex Trading Companies Can Spot High-Risk Customers

by Tamas Kadar
With the arrival of challenger banks and nonbanks, the online banking industry has seen a radical transformation in the last few years. But this also opened the door to more fraud attacks.
This article will detail where the risks lie, and which banking fraud detection software will improve your financial institution’s security.
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Banking fraud detection software is designed to help financial institutions such as traditional banks and neobanks detect fraudsters, bad agents, and criminals.
That includes users who attempt to open bank accounts with stolen IDs, money launderers, bonus abusers, and fraudsters who attempt to log into other people’s accounts.
Fraud banking fraud detection software tends to combine features of KYC (know your customer), AML (anti-money laundering), and authentication (to protect customer accounts from suspicious logins).
Banking fraud detection software comes in many shapes and sizes, but some features are recurring, such as:
Disclaimer: Everything in this article was gleaned from online research and user reviews. We did not manually test the tools. However, we ensured the information was correct as of Q3 2022. Feel free to get in touch to request an update or correction.
You’ll benefit from analysis tools that extract data from a single email address, phone number, and IP address. You can also learn a ton about who you’re dealing with based on their social media presence, and configuration of software and hardware via device fingerprinting.
All that data is fed through customizable risk rules, which can also be suggested via a whitebox machine learning algorithm. The key here is that SEON gives banking risk managers an extra layer of data to gain full confidence in accepting or rejecting risky customers, which has a knock-on effect on fraud rates down the line.
SEON is one of the rare fraud detection tools to offer transparent pricing and a free trial, so you can immediately see how its features can help your neobank, challenger bank, or FI with existing clients including Raiffeisen Bank, Illimity, and Nubank.
If you’ve worked in risk management (or any company that uses analytics) in the last ten to twenty years, chances are you’ve heard about SAS.
The Banking Analytics product of SAS is used by more than 3,500 businesses in 92 countries. In fact, more than 90% of the top 100 global banks are SAS customers.
So what does SAS do for banking fraud prevention exactly? Their framework is designed for anomaly detection to reduce risk and to consolidate your views of potential fraud. It is widely used in the BFSI sector (banking, financial services, and insurance), as it enables enterprise-wide monitoring from a single platform.
The features of its fraud detection platform include real-time transaction scoring and decisioning, blackbox machine learning, and alert management, all based on seamless integration of all your data, regardless of source or type.
While it was once the go-to platform for banking fraud detection, it seems to be increasingly replaced by – or at least augmented with – newer, more nimble anti-fraud software.
Acquired in 2018 by the multinational analytics company LexisNexis Risk Solutions, ThreatMetrix is quickly becoming a fraud prevention leader for financial services, insurance, as well as pension companies and nonprofits.
LexisNexis currently helps more than 78% of Fortune 500 companies and plenty others, in 170+ countries.
If you already use other LexisNexis products, the integration with ThreatMetrix should be seamless (albeit not free). A good example would be the missing data enrichment feature, which you can purchase through Emailage.
In terms of risk rules, however, ThreatMetrix offers anything you may need, from behavior tracking to custom rules and machine learning suggestions – all available via API calls or on-premise installation.
Trusted by banks such as Citi, Lloyds, and Santander, Feedzai is dedicated to protecting financial institutions in three ways: securing account openings, controlling transaction fraud, and stopping money laundering.
At the time of writing, the US-based fraud detection company protects a whopping 45% of the UK’s banking population and 55% of Canada’s.
Feedzai relies heavily on its open machine learning algorithms to mitigate complex financial crime, with native support for your own data science tools. The company claims it allows risk managers to create “hyper-granular profiles” for cards, terminals, devices, or IPs.
Last but not least, Feedzai’s AI system is even integrated into its case manager tool (to dispute financial crime cases) and its Genome tool, to visualize connections between accounts and attack vectors.
As a renowned UK credit scoring company, it makes complete sense for Experian to leverage its databases to offer identity verification services. It is exactly what its Hunter software does, with a focus on preventing application fraud in the banking world.
As Experian rightly puts it, the first and best strategy to reduce fraud losses is to identify criminals at the point of application. Their detection method is designed to be highly configurable, whether you’re a traditional retail bank or a challenger bank with low-friction needs.
And, of course, the key bonus is that you can integrate the application screening solution with other Experian products, such as the company’s renowned credit scoring tools.
Banking fraud detection and compliance overlap, which is why one of ComplyAdvantage’s founders, Charles Delingpole, joined SEON’s Series A round. But where ComplyAdvantage really shines is in its ability to focus on AML while reducing fraud rates relating to money laundering.
ComplyAdvantage includes transaction monitoring, customer screening using sanction lists and PEP lists, and even checks based on the Financial Action Task Force to monitor adverse media.
iComply, also known as iComplyKYC, makes it clear from its name that its core product focuses on due diligence at the banking onboarding stage. It’s an all-in-one KYC and AML solution that can also help you screen for identity fraudsters at signup.
When it comes to risk management, you will get all the standard KYC and AML features such as watchlists, PEP, and adverse media checks, as well as automation tools to save you time when processing customer data.
A powerful video verification tool, Ondato does more than just identity verification or document verification and ensuring accurate selfie authentication. It’s a full KYC and AML solution that is designed to help with onboarding, business intelligence, and user base management.
Sure, it’s a bit light on fraud detection features, but many of the problems faced by banks overlap with fake and synthetic IDs. One key advantage, however, is the white label solution to deploy Ondato under your own company brand if needed.
Another compliance tool whose features overlap with banking fraud prevention, Actico is the trusted solution by companies such as Santander, Volkswagen Financial Services and ING, among others.
You get KYC tools using risk scores and AML features such as PEP and sanction lists screening. If you’re a traditional bank still struggling to compete with neobanks, Actico also offers digital transformation services too.
The greatest risk for banks, neobanks, and financial institutions is onboarding users who are not who they say they are. Fraudsters use stolen IDs and synthetic IDs to create accounts. This creates compliance issues (KYC and AML), which can have dramatic consequences in the long run.
Once fraudsters and criminals have created their accounts, they will commit loan fraud, launder money, and use the account as a bank drop to receive payment from nefarious activities.
Existing banking customers are also at risk of account takeover fraud, where fraudsters acquire their login credentials and drain the account.
It’s worth noting that banking fraud attacks are increasingly targeted at neobanks and challenger banks, who pride themselves on offering a frictionless customer experience. The easier it is to onboard and sign in, the higher the risk of fraudulent attacks.
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There are three key goals of banking fraud detection software:
Roughly speaking, all three processes are performed by logging data, monitoring it, and investigating anomalies. Anomaly detection works by establishing a ground truth and looking for patterns (predictive analytics).
How risk managers deal with these patterns, however, varies depending on the kind of banking fraud detection software at their disposal.
Good banking fraud detection can also augment risk management and compliance in general terms, helping the organization save resources.
For example, consider neobank Hype’s adoption of SEON’s solutions, which allowed for streamlining onboarding with 90.06% auto-approvals without compromising safety. Customers, who appreciate a frictionless journey, now experience no obstacles in their experience, leading to a boost in satisfaction.
Banking fraud detection software comes in many shapes and forms. Here are the key types you should consider before deploying yours:
Fraud detection software is never easy to select. This is doubly true in the banking vertical, where you must take into account compliance, the quality of your data, and the efficiency of the tools at your disposal – which are often unavailable to try before you buy.
Hopefully, this primer on the nine best-rated banking fraud detection software will give you a better idea of where to look, what kind of features will work for you, and whether your choice can help protect your financial institution, challenger bank, or neobank in the long run.
Banking fraud detection software allows financial institutions to control who gets to open accounts on their platform, monitor the transactions, and ensure compliance with regulatory bodies.
Banking fraud detection software allows financial institutions to remain compliant with the law, protect their user accounts, and grow safely without onboarding criminals and fraudsters.
Investing in banking fraud detection software isn’t just a competitive advantage for financial institutions, neobanks, and challenger banks; it’s a legal requirement with regards to KYC, AML, and PSD2, among others. However, deploying the right tool can also help onboard more users with peace of mind, which can have a direct impact on growth and profitability.
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Tamás Kádár is the Chief Executive Officer and co-founder of SEON. His mission to create a fraud-free world began after he founded the CEE’s first crypto exchange in 2017 and found it under constant attack. The solution he built now reduces fraud for 5,000+ companies worldwide, including global leaders such as KLM, Avis, and Patreon. In his spare time, he’s devouring data visualizations and injuring himself while doing basic DIY around his London pad.
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