The 3 Most Common Fraud Types in Financial Sector Businesses

The financial sector is filled with opportunities, but it’s also vulnerable to a variety of ingenious frauds. As we move further into the digital era, criminals are finding increasingly more sophisticated ways to circumvent the defenses of financial institutions. Businesses in the financial sector must be aware of the fraud types they’ll most frequently face and understand the best practices for preventing them.

The Importance of Cybersecurity to the Financial Sector

According to a report published in 2024 by the International Monetary Fund, banks, insurance companies and asset managers have suffered more than 20,000 cyberattacks in recent decades, generating financial sector losses of $12 billion worldwide. In addition, the number of incidents has more than doubled since the pandemic, representing a growing threat to world financial stability.

In various parts of the world, financial institutions are under attack. JPMorgan Chase, with assets that make it the world’s largest bank, reported recently that it deals with 45 billion cyber events per day, spending $15 million yearly for security technology.

A similar report was made by the Industrial and Commercial Bank of China, which was hacked in November 2023, damaging trade on the Treasury bonds market involving U.S. Treasury bonds.

According to the IMF, losses from security breaches have more than quadrupled since 2017, now totaling $2.5 billion. Moreover, there is a “substantially higher” total for indirect losses, such as reputational damage or security-updating expenses.

The Main Fraud Schemes Suffered by Financial Entities

The world financial system suffers a wide variety of scam attempts, but the three most common are:

Phishing is one of the most common cybersecurity schemes. Scammers send fake emails or text messages posing as legitimate financial institutions for the purpose of obtaining confidential customer information. Once they gain access to this information, they drain victims’ accounts and divert the funds to bank accounts controlled by the criminals.

In this type of fraud, criminals obtain customers’ personal information to conduct transactions in their name, compromising account and data security. With this information, scammers make purchases and conduct fraudulent transactions in the name of the victims.

Fraud related to credit cards is extremely common, involving the cloning or capturing of the card data to make fraudulent purchases. This type of fraud produces financial losses for both institutions and customers.

Recommended Practices for Preventing Financial Fraud

When faced with such a threatening scenario, financial sector companies should take the following measures:

1. Behavioral analysis of suspicious people: Use advanced tools such as those offered by ClearSale to identify fraud patterns and suspicious activities.
2. Proactive monitoring of tools: Use solutions such as ClearSale’s Cyber Threat Intelligence to anticipate threats, eliminate fake websites and profiles, and take preventive measures.
3. Open-source intelligence: Use open-source intelligence (OSINT) to trace and collect evidence against scammers to support judicial actions and strengthen institutional security.

Adoption of these preventive practices aids in strengthening protection against fraud and guarantees secure transactions in the financial sector.

Open Sources to Assist in Processing Scammers

Fraud cases pose serious legal consequences to financial institutions, including fines, loss of reputation and the possibility of claims. Similarly, fraudersters can be subject to criminal and civil prosecution, resulting in severe penalties.

OSINT works to identify and trace scammers and assists in criminal law enforcement. Analyzing publicly available information such as social media, online forums and public records allows investigators to collect solid evidence to support the prosecution of scammers. OSINT can also identify behavior patterns and connections involving people involved in fraudulent activities, thus bolstering legal cases.

Preventing and combating fraud are actions that are essential to the security and integrity of financial entities. When finance companies adopt preventive practices, use advanced data analysis tools like Cyber Threat Intelligence by ClearSale and trust in open-code investigations, they can protect themselves from social engineering (efficiency and efficacy) without needing a large staff of cybersecurity specialists.