How do banks spot fraud before you do?

How banks protect you from fraud

CLEVELAND - Eight hundred dollars in electronics. Twelve hundred dollars at a high end shoe store. Who hasn’t been hit with bogus credit card charges? The good news is that today banks are spotting this fraud and letting you know, even before the charge goes through.

“Just recently my card was hacked from Germany and they bought train tickets,” said Samantha Ripkin, who twice in one month was hit with bogus charges totaling $1,400. “Instantaneously American Express called me. Yes, they had my back,” added Ripkin.

Instant notification it seems is the norm. So how do they do it?  The watchdog for your finances is a mathematical model known as an algorithm or neural-type network.

“The term ‘neural’ comes from the association with the human brain, because of the number of connections which are there,” explained Ian Holmes a Statistical Analysis System (SAS) Solutions Manager.

Holmes helps implement fraud detection systems in banks across the world. His company is a global leader in analytics.

Think of the neural network as a brain. Information from one neuron flows to another neuron through neural pathways. The brain learns, then categorizes into areas like spending habits, size of transactions, where transactions are made and how often.  And when something doesn’t make sense – boom – a “nerve blocker” is sent that stops us from feeling the pain of a fraudulent transaction.

Traveling somewhere you’ve never been? This computer brain can predict that. “We’re able to see those and identify those precursors and when we see those. We expect that you’re going to be on the move, and therefore that hotel spend is not something that’s unusual,” Holmes said.

We traveled to Security Operations at Key Bank. To a novice it might look like a computer cave, but the room is actually the tip of the sphere in security against cyber-attacks.

Using words like "intel" and “assets," what goes on in the room sounds like covert operations. “When you are talking about attacks against the customer, it very much is a technical discussion, unfortunately. They’re using high tech tactics. So we’re bringing in other groups,” said Robert Burch, Key Bank Chief Information Security Officer.

The people in this room notify the fraud department when they spot “events” big or small that could impact the customer. On one computer screen, green dots indicate the presence of new malicious software. Up to 150,000 new variants of malware creations are re-purposed and recorded to help the bad guys trying to get your money.

And on another screen, a display of so-called "honey pots."  These are websites with fake data, tempting the fraudsters to probe each one. Each laser beam shown is another attempt at theft. 

“Is it at all fascinating to you as someone who has watched this develop over time that an algorithm can condense our behavior into these numbers and identify when something is unusual?” we asked Jerry Kelsheimer, Regional President of Fifth Third Bank N.E.O. “It is fascinating to me and yet, I think something that’s important to note is that we still, as a financial institution hold in high regard the confidence and the confidentiality of our clients,” Burch said.

What about chip technology?  Experts tell us that while it is adding a layer of security, it’s also making the “bad guys” ramp up their efforts now. They realize the window of opportunity is closing for them. The chip is hard to duplicate. They’re really trying hard right now to get at our old magnetic strip technology.

While the banks are working to prevent fraud, it is still important to lock down our financial data and personal information.

Here are important steps we can all take to protect against credit card fraud.

  • Create strong passwords and keep them safe: Strong passwords contain both letters and numbers, making them more difficult for thieves to guess. The strongest combinations include upper and lowercase letters. Some security experts suggest putting numbers in the middle of the password instead of at the beginning or end.  The longer the password, the more secure it will be. Select passwords that you can remember, but don’t use your birthday, pet’s name, family names or your social security number.
  • Protect your PIN: Don’t write PINs down, carry them in your wallet or save them on a computer. Do not e-mail passwords or PINS, and memorize both.
  • Protect yourself when paying online: Paying bills online saves you time and the cost of buying stamps. Just make sure the website is a secure, encrypted environment. Look for a closed lock symbol in the bottom right of the screen, which means the site should be encrypted. Web addresses that begin with “https” also indicate secure sites.
  • Shred Everything: Shredding documents is one of the best ways to protect yourself against identity theft and fraud. By shredding all documents that contain any personal information (including your address, telephone numbers and other, more sensitive data., you make it harder for someone to find any sort of useful information to use against you.


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