Financial Services Security Frauds in India: A threat or just a myth

The recent unearthing of frauds and data theft and the subsequent sting operations followed by the US and UK has come as a shock to many organizations that trusted offshoring. And as the outsourcing trend continues to rise in the financial-services industry, the security of sensitive data has been a point of concern. As we all know, data is the lifeblood of the internet driven industry and its integrity cannot be compromised.

What is the Nature of the Threat?

A recent survey by the KPMG says that there is a digression in the nature of industries facing security threats. Earlier, it was the IT outsourcing and retail industry which were most prone to data theft. But now, most of the frauds uncovered have been faced by companies dealing in financial services. Banking/Insurance/mutual funds/AMCs are the first category of company facing threats. The next is NBFCs, Investment Banks, Venture Capitalists, Private Equity. The other categories mentioned in the survey were - Media/Software, Retail/Consumer products, Foods/Beverages, transportation, Power/energy. The threat perception of these sectors is generally higher mainly on account of the nature of their businesses and the high growth rates achieved by these sectors in the last few years.

Why are the Organizations Threatened by Fraud?

According to a survey, lack of ethical values has been identified as one of the main reasons for fraudulence. Some of the other reasons can be enumerated as follows

• Dissatisfaction among employees
• Poor internal controls
• Collusion between vendors and employees
• Inadequate background checks on prospective employees
• Management override of control

How were these Frauds Detected?

Most cases of fraudulence were detected by the company's own internal audit or by a third party. Some of the other ways in which an organization lost its revenue and was brought to light has been through: