Issues with Fraud Compliance Weaken Nearly Two-Thirds of Financial Institutions
In a groundbreaking report, "Meeting the Mandate to Align Fraud Prevention With Compliance Demands," a collaboration between Intelligence and Visa DPS, top-performing U.S.-based card issuers are breaking down silos between fraud prevention and compliance to build smarter, coordinated risk strategies.
Part of the Best-in-Class Modern Issuer series, this report aims to understand the strategies and challenges faced by U.S.-based card issuers in the digital era. Based on a survey of 451 executives who fill head of payments roles at U.S.-based bank and nonbank card issuers, the report offers a comprehensive analysis of the current state and future direction of fraud prevention and compliance in the industry.
The report reveals that less than one-third of issuers currently report effective collaboration between fraud prevention and compliance, leading to costly gaps in risk management. To address this issue, successful issuers adopt several key approaches.
First, integrated team structures combine fraud and compliance functions or establish strong communication channels to share insights and data, thereby creating a unified risk posture. This reduces duplication and conflicting objectives between fraud detection and regulatory compliance.
Second, leveraging technology to solve human problems is another crucial strategy. Successful issuers adopt technologies that not only automate fraud detection and compliance monitoring but also enable human analysts to focus on strategic decision-making. This synergy allows for faster adaptation to evolving fraud patterns while ensuring regulatory mandates are met.
Third, data-driven coordination is essential for a more holistic view of risk. Sharing data across fraud prevention and compliance teams provides a more proactive response to risks instead of reactive measures. This includes using combined analytics to detect anomalies that impact both fraud risk and compliance status.
Lastly, executive sponsorship and mandates are crucial in breaking down these silos. Top-performing issuers mandate cross-functional alignment as part of their risk culture and strategy, incentivizing collaboration and accountability across teams.
The report also discusses the risks associated with operating fraud and compliance functions in silos and the structural, cultural, and technological shifts necessary for institutions to meet today's risk challenges. It offers insights into the strategies, constraints, and technology priorities shaping the future of fraud and compliance in the digital era.
Moreover, the report provides a window into the strategies and priorities of top-performing issuers in the area of fraud prevention and compliance alignment. It offers a roadmap to operational resilience and provides guidance on how to unify the two critical yet often disconnected functions of fraud prevention and compliance.
In conclusion, the most effective risk strategies emerge when fraud prevention and compliance groups are no longer siloed but operate as coordinated partners supported by integrated technology, shared data, and unified objectives. The report, collected from Dec. 13, 2024, to Jan. 17, 2025, underscores the importance of this alignment and reveals insights into what sets these leaders apart and why alignment is no longer optional.
- To effectively manage their risk strategies, top-performing U.S.-based card issuers are collaborating between fraud prevention and compliance functions, breaking down silos and building integrated team structures.
- By utilizing technology, these issuers automate fraud detection and compliance monitoring, allowing human analysts to focus on strategic decision-making and adapt quickly to evolving fraud patterns while maintaining regulatory compliance.
- A holistic view of risk requires the sharing of data across fraud prevention and compliance teams, enabling proactive measures instead of reactive ones, and using combined analytics to detect anomalies impacting both fraud risk and compliance status.
- Executive sponsorship and mandates for cross-functional alignment play a crucial role in creating a unified risk culture and strategy, incentivizing collaboration and accountability across teams.
- The importance of aligning fraud prevention and compliance functions is underlined in the report, as it offers insights into the strategies, constraints, and technology priorities shaping the future of the finance industry, noting that this alignment is no longer optional for top-performing issuers.
