How to Manage Risk

This is the process involves the process for any application from a: Individual Cardholder Company or Corporate cards Merchants Any other organisation that applies for a facility or product Application Processing

What is involved in the process You basically collect as much information about the person as possible Name Address ID Number Dependents Salary Employer Etc: Application Processing

Why To be able to make the best decision possible on the viability and value of this customer to you as a provider of services To be able to identify where this person or organisation is at this time to be able to support marketing of products and cross selling to that individual or organisation And To comply to the National or International requirements that you are subject to as an Issuer or an Acquirer Application Processing

Application Fraud has been one of the major growth areas in fraud in many countries in the last few years The fraudster obtains enough information about a person or company to allow them to make a fraudulent application for a card, loan, mortgage etc: The fraudster then takes the money in a loan and disappears or uses the card to its maximum credit limit. Fraudsters have used information obtained on existing individuals, dead people and so on with high levels of success. Application Fraud

Credit scoring is where a central organisation holds information on individuals and companies to allow Banks to obtain a score on the validity of the applicant for a card, loan etc: The database holds Current account statuses Defaults Court Judgements Electoral Rolls Anything that relates to people and companies Credit Scoring

Where they exist they are very valuable and are heavily used But they can be a problem when data is: Incorrect Wrongly applied to a person or company Malicious data has been provided and used Old and out or data is not removed In many countries now you have the right to see the data held on you and to be able to correct it with the right evidence. A small fee is normally charged. Credit Scoring

All banks have credit risk parameters and profiles in place for all products In the past they have been ignored and overridden, a good example was sub-prime mortgages in the USA. Credit Risk Policies must be updated on a regular basis and must be adhered to in all cases. In the US credit card companies ignored their Credit Risk policies in the 10 – 15 years up to 2008, and they very nearly had a sub-prime credit card problem But now Credit Risk is applied strictly and that problem has been avoided., Credit Risk

When you sign up a merchant or a company you have to go through a number of required checks: Visa VMAS and MasterCard Match fraud databases Company house checks UN Sanctions List Company accounts validity If all of these are not passed you cannot set up an acquiring relationship with a merchant or a corporate account with a company Scheme Risk Processes

KYC – Know Your Customer and KYB – Know Your Business are now strictly enforced by the Financial Services Agencies or Central Banks in a country. This involves seeing: Passport / ID card Utility Bill Bank Statements Company Accounts And in companies can be applied to all directors of a compnay. KYC / KYB

Risk Profiling is a process that allows you to measure a profile for any element in a product, including: Profitability Credit Limits Authorisation Limits Collections potential Applicant profile Product potential Used properly it is possible t effectively manage portfolios at a detailed level. Risk Management Profiling

Card Risk is one of the highest risks in banking at this time. Whether its an application, limit increase, over limits authorisation - anything The fraudsters know and understand these areas in detail and will exploit any gap or weakness they see Processes, procedures, policies are all needed to guide staff in these areas and allow then to make the right and approved decisions in any area. These are supported by fraud monitoring systems and automated rules But all of the above must be applied to make it work effectively to prevent and stop many frauds Managing Card Risk

It does work If as an organisation you don't apply it you will: Be hit by fraud and losses The regulators will become involved and will demand explanations Your business can be curtailed or stopped completely And then you will be heavily controlled in any future product launch, market expansion etc: Does this work and How does it Affect Your Organisation

Watch out for patterns indicating: 1. Purchase a large amount of merchandise without regard to size, style, colour, or price. 2. Ask no questions on major purchases. 3. Try to distract or rush you during the sale. 4. Make purchases and leave the store, but then return to make more purchases. 5. Make large purchases just after the store’s opening, or as the store is closing. 6. Refuse free delivery for large items. Six Warning Signs of Fraud

1. First-time shopper 2. Larger-than-normal orders 3. Orders that include several of the same item 4. Orders made up of “big-ticket” items 5. “Rush” or “overnight” shipping 6. Shipping to an international address 7. Transactions with similar account numbers 12 Potential Signs of CNP fraud

8. Shipping to a single address, but transactions placed on multiple cards 9. Multiple transactions on one card over a very short period of time 10. Multiple transactions on one card or a similar card with a single billing address, but multiple shipping addresses 11. In online transactions, multiple cards used from a single IP (Internet Protocol) address 12. Orders from Internet addresses that make use of free e- mail services 12 Potential Signs of CNP fraud

Do not click on attachments that you do not recognise Be suspicious of return addresses Be suspicious of messages Be suspicious of web links Don't download or install anything that you are sure what is it Update Internet Explorer with anti-phishing tools Report Phishing Educate consumers: Phishing Educate consumers: Phishing

Keep your personal information secure Keep all your plastic cards safe Keep your documents safe Keep your passwords and PINs safe Protecting the identity of deceased family members Educate Consumers: Protect your identity