Fraud Thoughts

Fraud Thoughts (Part I)

Inaugural Edition

Welcome to the inaugural edition of Fraud Thoughts – where I will share insights with you from my day-to-day experience across a multitude of fraud topics such as fraud management leading practices, hot issues (like GenAI, and whatever is next!) and cover top fraud stories and trends from across the globe.

If we haven’t met, it is a pleasure to connect with you here! I am Sophia Carlton, a Fraud Management Expert – I have worked with clients of many shapes and sizes and across many industries throughout my fraud management consulting career. One thing continues to ring true: fraud is a constantly evolving problem regardless of size or industry. It is why I love this field and feel passionate about contributing to the fight against fraud in all its forms to safeguard people and organizations alike.

Fraud Thoughts was conceived long ago when I had the idea for my first article on how the bystander effect impacts fraud management, published in 2019 in the Fraud Examiner – you could say I am not only a fraud fighter but a fraud nerd. I caught the writing bug after that. From there, I have contributed to multiple industry resources, published articles in industry publications such as Fraud Magazine and the AGA Journal, and won two author awards.

In my accounting studies, I rarely had the opportunity to explore my interest in writing. The ability to do so in a field I have dedicated my career to has brought me immense joy. So, thank you for following, and I look forward to connecting with you each month.

This newsletter will be in your inbox on the first Thursday of each month – this month, I have topics separated by what’s happening, what’s new, and what’s next in the world of fraud risk management.

A big thank you to each contributor to this edition of Fraud Thoughts who provided their insights and perspectives – including Suzanne Carlson and Karley Herschelman.

If you have a topic you want to see covered, want to contribute or collaborate on a future edition of Fraud Thoughts, or have questions about any of the content in the newsletter, feel free to reach out to me on LinkedIn or by email –

What’s Happening? Financial Services Edition

The financial services industry is seeing a rise in specific fraud trends – spanning ATO, ID theft / Synthetic ID, and Check Fraud – in addition to common themes in fraud management approaches – spanning a renewed focus on customer experience, a continued focus on scam intervention, and the ever-present pressure to do more with less. Across these themes, there are consistent trends in how financial services entities tackle the problem. Check out these trends and mitigation themes in the figure below:

[1] Sift Q2 2023 Digital Trust & Safety Index

Across these trends, there is a lot to explore! We may dive deeper into these topics in future editions, but in this edition, we want to hit some highlights…

Check Fraud is BOOMING!

There was an expectation that checks would become a way of the past, which led to less investment in the tools and tech needed to prevent and detect these schemes. This has led to a technology gap. Across institutions, there is a gap in image analysis or forensics capabilities – leading to a reliance on manual review. Manual review means a person performs certain checks to determine the check’s validity and authenticity. These checks may catch certain red flags, but an image analysis or forensic solution will find things the human eye may miss or can’t see.

Image analysis or forensics supplements transaction analytics or monitoring. Transaction monitoring can detect anomalous check writing for the account, such as unusual dollar amounts, atypical check writing velocity, or a serial number significantly out of range and not clustered with other items. Image analysis can detect anomalies for the check itself, such as anomalies indicative of forgeries and alterations. This type of tech has come up at almost every institution we have supported this year – leaders in this space include Orbograph, a provider of check fraud detection and image recognition solutions.

Outside of the tech – there are also new avenues institutions can and should explore to help combat this continuing problem. In commercial banking, tools like positive pay have been around for some time and can be very effective for on-us check fraud…if adopted by customers, but that is another story. A similar approach for retail will help drive down losses. For example, we are seeing a rise in push notifications in the app (check out this article on why push notifications are more important than ever). These notifications can also alert customers when a check is presented for payment – enabling the customer to confirm the details or contact the bank if the check is fraudulent.

Customer Experience is King…

This is not to say that customer experience hasn’t always been top of mind – but with increasing and evolving threat landscapes and ever-present fraud interventions or warnings in place to mitigate those threats, customer experience is having its heyday, and for good reason. If an institution applies too many rules, checks, or restrictions to transactions, good customers will get frustrated or may find another place to bank with more convenience and speed. However, it is a double-edged sword. A recent survey found that two-thirds of customers will switch providers due to fraud experience or for better safeguards.

Where is the middle ground if customers want to be protected but not inconvenienced by those protections? This brings us to a long-time battle between fraud risk management and customer experience. Striking the balance is a delicate act that can have bottom-line impacts if not done correctly. Institutions leading the charge have clearly defined fraud journeys – meaning they know when fraud interventions occur across a specific customer journey, such as initiating an ACH transaction in the banking app – with a focus on gathering active and passive feedback.

Assess the impact of fraud controls, enable insight-driven action

Passive feedback here reigns supreme – passive feedback can be gathered without asking your customers a thing. Check out this example below:

A customer journey resolved through self-service

The outcome of our example above is insight. With that insight, the bank can determine how fraud controls and interventions must be adjusted across crucial customer journeys to delight good customers while maintaining friction for bad actors.

Is your institution dealing with some of these trends? Let me know what your organization is experiencing and any questions in the comments, or message me directly.

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Author: Sophia Carlton

I am a seasoned fraud risk management executive with extensive experience in best-in-class fraud risk assessments, fraud operations, internal and external fraud investigations, developing and implementing enterprise-level anti-fraud strategies, and standing up fraud risk management programs in complex environments. I have spent the last 8+ years helping clients solve their toughest fraud challenges, with clients in both the public and private sectors – spanning from large complex federal agencies to Fortune 100 and 500 companies across multiple industries including financial services, insurance, automotive, manufacturing, healthcare and telecommunications, among others.