Fraud and Scam Risk Prevention Checklist for Banks: Strengthening Governance and Oversight

By Pallavi Kapale, Senior Financial Crime Officer - Financial Crime Intelligence Unit, Bank of China, Sandy Lavorel, Head of Fraud Intelligence, NetGuardians. 

As the threat landscape continues to evolve, financial institutions face unprecedented levels of fraud and scam activity, often orchestrated by organized criminal networks with sophisticated capabilities. Traditional, siloed approaches are no longer sufficient. Fraud prevention must now be embedded as a core component of a bank’s governance and enterprise risk management strategy. This blog outlines a comprehensive fraud and scam prevention checklist that integrates governance, operational resilience, and customer protection into a unified, strategic framework.

• Integrate fraud prevention into enterprise risk management (ERM): Ensure that scams and fraud are officially recognized as Tier 1 risks, with regular updates provided to the Board and Risk Committees. 
• Establish a fraud risk appetite: Define clear tolerances for different types of scams (e.g., Authorized Push Payment (APP) fraud, investment scams, insider threats) and set thresholds for loss events, near misses, and customer impact.
• Designate a scam risk lead: Appoint an individual at the executive level who will be accountable for managing scam risks, with clear responsibilities and budget ownership.

1. The fraud detection system, and
2. The organizational structure to support fraud management.

These elements must be designed and deployed together, by design, and endorsed at the highest level within the organization. A fragmented or siloed approach is no longer sufficient to respond to today’s sophisticated and rapidly evolving scam landscape.

In addition, the fraud response strategy must span the entire lifecycle from prevention to payment initiation monitoring, through to real-time detection, investigation, and the crucial call-back to the customer. Each of these stages must be tightly integrated to enable timely intervention, reduce financial losses, avoid customers losing life saving money, rebuild trust with affected customers and finally prevent customers from banking with another institution.

• Deploy Enhanced Identity Verification: Utilize a layered approach to identity proofing that combines biometric checks, device fingerprinting, and behavioral analysis
• Monitor for Synthetic Identity Indicators: Employ machine learning models to detect mismatched data points, unusual digital trails, and newly fabricated profiles.
• Screen Against Watchlists in Real-Time: Integrate sanctions, PEP’s, and adverse media screening during onboarding and key life events.

• Implement Real-Time Payment Fraud Systems: Use predictive analytics to flag or pause high-risk transactions, especially during first-time payee setups.
• Leverage Typology-Driven Rules: Regularly update scenarios that align with known scam patterns (e.g., cryptocurrency transfers following Authorized Push Payment (APP) scams and high-speed new payee payments).
• Use Contextual AI/ML Models: Analyze customer behavior holistically across channels, products, and time frames to detect anomalies.

• Run Proactive Scam Awareness Campaigns: Utilize omni-channel alerts (SMS, app notifications, email) targeted at high-risk demographics, providing context-specific warnings.
• Embed Contextual Friction in Customer Journeys: Present dynamic warnings during unusual transactions (e.g., crypto transfers or investment schemes) that require explicit confirmation.
• Offer Secure ‘Payee Confirmation’ Features: Implement measures such as Confirmation of Payee (CoP) for new beneficiaries to help reduce APP fraud.

• Create a Dedicated Fraud Response Unit: Establish rapid triage, forensic investigation, customer support, and liaison with law enforcement.
• Ensure Transparent Reimbursement Policies: Align reimbursement practices with the PSR and FCA expectations regarding APP scam redress and fair treatment of victims.
• Facilitate Victim Intelligence Gathering: Utilize insights from scam victims to refine typologies and identify previously undetected patterns.

• Integrate Fraud Risk with Cyber, AML, and Operations: Break down silos to enable shared intelligence and collaborative investigations across threat vectors.
• Monitor for Internal Fraud Indicators: Regularly screen employees with access to sensitive systems, especially within high-risk operational functions.

• Participate in Industry-Wide Data Sharing: Join platforms like CIFAS, UK Finance, and NECC to detect systemic and cross-bank fraud patterns.
• Collaborate with Telecoms and Big Tech: Coordinate scan takedowns (such as fake websites and spoofed phone numbers) with digital platform providers.

• Include key indicators such as fraud savings, detection lead time, customer impact scores, and false positive rates.
• Analyze past events to refine controls, update training, and improve customer journeys. Scam prevention has evolved beyond being a simple compliance measure; it has become a strategic imperative that requires agility, intelligence, and unified execution across the bank's ecosystem. The costs of failure extend beyond financial implications—they also affect reputation and regulatory compliance.

Fraud and scam prevention is no longer just a compliance requirement—it’s a board-level priority that demands strategic alignment, continuous innovation, and enterprise-wide execution. By embedding scam risk management into the governance fabric and operational DNA of the institution, banks can better safeguard their customers, uphold regulatory expectations, and protect their reputation. In the era of real-time payments and hyper-digital banking, the cost of inaction is simply too high.