BFA #008 | Perfect Fraud Team isn't Perfect

What's happening Fraud Fighters?

Did you miss me? Some of you probably not so much as I met so many new friends at MRC this week. As we end the week high on the energy from the conference, here's a little cherry on top.

This week covered topics across all different types of fraud, but it's only as valuable as what we do with it now. I'm here to make sure we take advantage of the new power you've unlocked.

Turn those new powers into building up your fraud team to the next level.

Let's investigate further

Read Time: ~4.4 Minutes

The Hike is Steep

As a first-time fraud manager for a startup, I was excited about the opportunity to build a fraud program from scratch. I was determined to create a robust system that would protect our business from any potential threats. But let me tell you, getting the support I needed from the leadership team was like pulling teeth.

I had presented my plan to the execs, but they seemed hesitant to provide the necessary resources and support. They didn't fully understand the importance of the fraud program, and as a result, they didn't prioritize it.

I had to practically beg for their buy-in, and it felt like I was fighting an uphill battle. I mean, I laid out all the potential risks and consequences of not having a strong fraud program, but it seemed like they were deaf to my concerns.

Despite my frustrations, I refused to give up.

Organizing the Chaos

Building a fraud team from scratch can seem like a daunting task. I call it organizing the chaos

I've typically taken over from a fraud by committee. Think a sprinkle of CS, engineering, product, finance, ops. A bunch of people who are thinking how did I end up with this role. They're thinking I want nothing to do with this - get this off my plate yesterday.

Insert: me.

Now, it's time to build the fraud team.

Understand the customer journey: By understanding the customer journey, you can develop a fraud prevention plan that addresses these risks and vulnerabilities. You can't build a fraud team if you don't understand what type of fraud you'll be responsible for combatting.

If you're serious about preventing any fraud, you need to have a laser-sharp focus through the entire customer journey. Understanding each and every step from initial contact to transaction completion is key to spotting potential fraud risks and putting in place effective controls to prevent foul play.

Assess the company's fraud risks: Before building a fraud program, it's important to understand the types of fraud risks the company faces. You've got this. You're the expert.

We'll conduct a comprehensive risk assessment to identify any potential sneaky schemes that may be lurking about. From there, we'll confidently evaluate the likelihood and impact of each scheme, and determine the measures we're already implementing to prevent or detect any fraudulent activity.

Document the risks that are covered: We can't just sit back and assume that our existing fraud prevention measures have got us completely covered. We need to take a good, hard look at the risks that are covered...

Document your blindspots: ...and the ones that are not. By doing this, we can pinpoint the areas where we need to tighten up our game and add some extra controls to mitigate potential fraud risks. After all, we're not just going to sit around and wait for the fraudsters to make their move, are we? Let's show them who's boss and take action to keep our company safe from any sneaky schemes that might come our way!

It's not enough to just assume that our existing measures have us completely covered

Define the fraud team's roles and responsibilities: We need to be clear about the scope of their work. What areas of the business will they be responsible for? What types of fraud will they be focused on? By defining the scope, we can avoid any confusion or overlap with other departments, and ensure that the team is using their time and resources most effectively.

But it's not just about setting limits - we also need to empower the team to take ownership of their work and make decisions with confidence. By providing them with a clear scope and a sense of purpose, we can give them the autonomy they need to make a real impact on fraud prevention within the company.

Create goals and objectives: To build an effective fraud prevention program, we need to set clear goals and objectives. We can't just aimlessly throw efforts at the problem and hope for the best - we need a focused approach.

Let's start by identifying specific goals. By setting clear objectives, we can measure our progress and see where we're making strides and where we need to improve.

Determine communication with stakeholders: Establish effective communication channels with stakeholders, such as customers, employees, and third-party vendors, to facilitate fraud prevention and reporting.

Develop fraud management plan: It is critical to develop a comprehensive fraud management plan that outlines the procedures and controls necessary to prevent, detect, investigate, and report fraud. This plan will serve as the foundation of your fraud program and will help ensure that your organization is equipped to handle any potential threats.

Implement fraud tooling and data: Run through your results from step 1 and 2 above. Build out your perfect fraud stack to protect every corner of your product. Create smart friction that responds as fast as fraudsters do.

Educate others: You already know how I feel about educating others around your work. It's no different here. It may be even more critical. Provide training and education to employees, customers, and other stakeholders on what your team has been doing - share the wins, the losses, and the learnings.

Monitoring and process improvement: Continuously monitor the effectiveness of the fraud prevention program and make improvements as needed, such as updating fraud detection tools or revising policies and procedures.

Hire the right people: Building a successful fraud team requires more than just hiring people with relevant experience. It requires identifying individuals who possess a combination of skills, including critical thinking, attention to detail, and strong communication skills. These individuals should also have a passion for combating fraud and a willingness to continuously learn and adapt to new fraud trends and techniques.

If you wanna build a badass fraud team, you gotta be systematic and committed to stopping fraud dead in its tracks. Follow these steps and you'll have a solid foundation for your fraud program that can handle any risk that comes its way.

TLDR

It's natural to want to stick to a clear plan, but the truth is that things don't always go as expected. You should be flexible and adaptable to changing circumstances, and it's important to be open to new ideas and perspectives.

Here is a 12-step framework that can guide you into building and improving your fraud team with flexibility.

1. Understand the customer journey

2. Assess fraud risk

3. Document what's covered

4. Document blindspots

5. Create scope clarity for the fraud team

6. Create fraud's goals and objectives

7. Create stakeholder communication plan

8. Develop fraud strategy

9. Implement fraud tooling and data

10. Educate others

11. Monitor and improve

12. Hire when ready

Consistency and Persistence Wins

I don't mean to brag, but my persistence was the real MVP here. The executives started to see the importance of the fraud program and provided the necessary resources and support. It was a slow process, but I knew that building a strong fraud program from scratch would take time and patience.

Lesson learned: when you're building something new and amazing, don't expect everyone to see your vision right away. It takes time and a whole lot of evidence to convince some folks. But with some patience and a killer attitude, you can get the support you need to build a kick-ass program. And let's face it, who doesn't love a good success story?

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See you again next Friday in your inbox.

​Brian