How banks can use models to better assess customer risk

In a new webinar series, Alessa explores the various elements of customer risk. In its latest one, it examines how firms can assess products and services, activity patterns and behaviours to uncover illicit activity.

The informative video offers an in-depth analysis of how banks are able to assess their customers use of products and features to uncover anything that is suspicious and would need to be reported to authorities.

For example, this could be seeing the typical patterns a customer has with certain financial services, such as regular ACH transfers each month and a typical number of checks written. If the customer suddenly receives an international wire transfer on a particular month and then makes several cash deposits under $10,000, this is an anomaly that would need to be investigated for fraud.

In addition to the explanation, the webinar offered some advice for firms that want to implement strong risk scoring models.

One key piece of advice is that firms should keep their models as simple as possible, so they are clear, logical, easy to test and modify where needed. Firms might also wish to score their products and services from a money laundering risk perspective, so it is easier to demonstrate why some are higher risks than others.

Similarly, firms should have a formal record of how it is designed, what the rationale is for each specific risk and why this is the case.

Furthermore, it is important to educate front line staff around the risk factors that are associated with products and services, as well as how to recognise suspicious activity. This will help them become better at protecting the institutions.

Finally, the webinar explained it is important to ensure the risk score is dynamic and their information is always updated. Their profile will always change and the model needs to keep up with this.

Watch the full webinar here.

This is part of an ongoing series of webinars, see the previous one here. 

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