The Metamorphosis From Fraud Analyst to Fraud Professional

Approximately US$800m to US$1bn is spent by financial institutions each year on the latest fraud detection and prevention technology. The incremental investments in technology are undoubtedly required to keep pace with the fraudsters and growing fraud risk associated with new products and delivery channels. However, most fraud managers will agree that effective technology is only part of the total equation required to achieve financial and operational goals. Equally important are the fraud staff who leverage the technology solutions to investigate fraud alerts and are charged with making well informed decisions on whether the alerts represent true fraud or false positives.

In my experience, some of the largest losses and negative customer impacts were not the result of technology failures. They were caused by fraud analysts who made the wrong decision on a fraud alert. In most cases, the analyst involved had a history of more performance errors than their peers, admittedly took their ‘eye off the ball’ or failed to take that extra intuitive step to uncover the fraud. The root problem was not training or credentials, but one or more core innate competencies. It had very little to do with the analyst not trying or striving to improve their performance. We often broadly classify these employees as not being well suited for the job. Today, it is understood that fraud managers are staff constrained and challenged more than ever. There is very little tolerance for sub-optimal performance.

One way to improve staff productivity is to hire individuals that not only have the right credentials but also possess the types of innate competencies that make them suitable for top level performance. In doing so, you will be changing the paradigm from ‘fraud analyst’ to ‘fraud professional’. Achieving optimal results from today’s sophisticated detection systems requires a fraud professional who can make consistently accurate decisions in the best interest of the bank and customer. The core innate competencies discussed in this article cannot be taught – they are part of a person’s individual characteristics and/or genetic make-up. We all have them but in varying degrees. Job candidates that have been selected by incorporating an effective assessment of their innate competencies are more likely to have the following skills:

• To be efficient in interpreting the fraud indicators provided by the detection system.
• To be effective in assessing the elements and degree of risk to the customer and bank.
• To go beyond the obvious and use good independent discretion in performing the fraud alert investigation.
• To document the investigation results accurately in a clear and concise manner.
• Provide outstanding customer service and effectively interacting with co-workers in a team environment.

The process of screening and selecting the fraud professional has to start with changing the standards for candidate selection. I place these standards into two general categories.

• Experience/CV.
• Core innate competencies.

Experience/CV

Fraud managers and recruiters have historically been very adept at screening, interviewing and hiring based on a candidate’s market experience, previous positions held, and how well they present themselves in the interview process. In general, the hiring process is more about what the candidate knows about fraud, how well they can speak about it, and not as much about problem solving and other innate competencies required to achieve a higher level of performance. Hiring using this process has been traditionally effective; however, we now know that candidates selected using primarily this process do not always make the best fraud analyst irrespective of their fraud knowledge.

Core Innate Competencies

Today, the fraud staff must have a broader set of competencies that make them uniquely qualified over and above their subject matter expertise. Recruiters and hiring managers should specifically screen and evaluate candidates for their competencies to:

• Be effective in an environment with high work volumes and tight time deadlines. Depending on the fraud detection process, the fraud professional may be required to deal with several hundred fraud alerts a day. There are also tight cut-off times to complete the days work, so this is not a natural fit for everyone.
• Perform repetitive tasks without becoming bored or complacent. Although not all fraud alerts are the same, the fraud professional must perform some of the same investigative process steps. In some respects, you are looking for some of the same competencies required in other positions where there are repetitive tasks such as proof processing.
• Make decisions with high monetary and customer impact. The fraud professional must be confident and pragmatic in making decisions on alerts that may have significant monetary risk and exposure to both the bank and customer. Individuals that are comfortable in making these decisions or unnecessarily rely on others’ feedback to make a decision are not as productive as their peers and tend to make more errors.
• Distractions in the workplace – many fraud operations are located in open cubicle environments with the staff working in very close proximity to each other. Many people are easily distracted by noise and movement. The capability to concentrate and not be distracted in an open environment is a unique capability and not the right setting for individuals who require quiet. If concentration is easily broken, the chance of making errors is dramatically raised.
• Demand for excellent communication skills – many fraud professionals directly interact with the customer and have the opportunity to provide a positive experience under negative circumstances. Outstanding communication skills and the ability to relate to the customers ‘pain’ is a must.
• Intuitive and inquisitive thinking – there are no set steps or procedures that, if followed, will be totally effective in conducting an effective fraud alert investigation. The fraud professional must be proficient in using their independent discretion in following leads and an investigative trail.

Most importantly, the fraud professional must be passionate about their job, highly motivated, and a team player. There is nothing more distracting to a team than an employee who is not self motivated and spreads that demeanour to other employees.

I know all of this may sound great but the results in performance can be dramatic and measurable when the hiring extends beyond subject matter expertise and includes core innate competencies. In my former career as a fraud manager, our fraud detection and prevention division conducted a Six Sigma study on fraud analyst performance and decisioning errors. The results clearly disclosed that improvements in our hiring standards were vital. The hiring and qualification standards were amended accordingly for both the recruiters and the hiring manager to allow a more accurate and full picture comparison of core competency levels across job applicants. A comparison of staff hired under the new guidelines compared to those hired under the previous guidelines disclosed that staff hired under the fraud professional guidelines became fully productive in approximately 50% of the time required by staff hired under the previous guidelines, were able to effectively handle approximately 5% to 10% in additional alert volume, were less prone to make errors and received more positive feedback from customers.

Each of these benefits contributed to improvements in loss reduction performance as well as achieving a productivity goal with no increase in staff expense.

Summary

How does your fraud department or division perform and are you getting the very best from your team? One clear way is to tune-up the hiring process by incorporating an assessment of the candidate’s core innate capabilities. You will be able to see and measure the metamorphosis from fraud analyst to fraud professional, which could show the value of investing in a fraud professional.