Threat of insider fraud growing with bad economy

Actimize survey shows financial institutions see insider fraud threat growing as economic recession puts pressure on employees

Financial institutions see the threat of insider fraud increasing and cite the slow economy as driving the surge, according to a recent survey by Actimize Inc.

The survey of 70 financial-services firms showed that more than 80% believe the threat of employee fraud is on the rise. That's about a 25% increase from two years ago when Actimize Inc., a New York-based transactional risk management software firm, conducted a similar survey.

Seventy-eight percent of those surveyed said the economy was driving up the threat of employee fraud. Almost 70% said full-time employees posed the biggest insider fraud risk. Sixty-two percent said the bad economy was contributing to an increase in rogue trading.

The survey also indicated that more financial firms have invested in more technically sophisticated technology to fight insider fraud, said Paul Henninger, director of fraud solutions at Actimize. Nearly 30% of respondents said they used cutting edge technology compared to just 7.5% in 2007.

At the same time, about 30% of those surveyed believe they catch most employee fraud, down from 43% two years ago.

"Although banks have made a concerted effort despite economic pressures to continue to invest in more sophisticated defenses, they've discovered the problem is bigger than they thought," he said. "The number of employees willing to commit fraud has increased due to the economy."

Of the 70 firms surveyed, half were retail banks and half were organizations with assets over $30 billion. Forty percent of those surveyed specialize in fraud prevention/loss management and IT/information security. The rest were business managers, internal auditors, corporate investigators and compliance/risk officers.

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