What is a Fraud Analyst?
Fraud analysts are risk professionals whose job is to prevent, deter, detect and investigate acts of fraud committed against the bank or its customers. Banks use different terms for this position like – fraud risk manager, operational risk manager, fraud analyst, transaction risk manager, fraud risk officer, fraud investigator and so on. They are all broadly related to the same role.
Fraud risk is a subset of operational risk. Operational risk refers to the potential financial or reputational loss resulting from inadequate or failed internal processes, systems, people, or external actions by malicious actors. Fraud is one of the main components of operational risk and the reputational risk from fraud can seriously affect banks.
Fraud management is essentially a four-step process:
- Planning and executing a fraud management system
- Prevention and deterrence
All of the tasks performed by fraud risk analysts and even senior fraud risk managers fall into one of these four broad categories. Let’s look at some examples of these tasks now:
- Having a real-time understanding of the threat landscape related to the bank’s financial services offerings.
- Familiarity with the bank’s existing capabilities in fraud detection and strengths/ weaknesses.
- Perfuming an analysis of all service delivery channels (mobile, web, physical etc.) from a fraud perspective.
- Preparing a complete fraud management system which includes policies, procedures, priorities, roles and responsibilities.
- Performing multijurisdictional investigations across states or international lines.
- Modern fraud analytics is a heavily data driven process and requires effective use of data analytics and statistical techniques for financial investigation purposes.
- Fraud analysts have to maintain relationships with other stakeholders and possibly prosecutorial agencies and regulators.
- Fraud analysts must offer real-time oversight and coverage of the bank’s operations.
- In case of a suspected incident, a detailed incident review has to be performed which requires a multidisciplinary approach and coordination with multiple teams.
- The prevention of fraud is important, but it should not adversely impact the customer’s transactional experience. Developing strategies and methods that can balance these tasks is the creative part of the job.
- Fraud analysts essentially provide what is called the second line of defense. They are also responsible for challenging the first line of defense and testing its weak points.
- Fraud risk analysts are expected to attend emerging risk trainings and conferences in order to understand, manage and mitigate new risks being faced by their business verticals.
- Necessary escalation must be performed when certain risk events are detected as per bank policies.
That is quite a list of tasks (and still not complete) but remember that you don’t have to perform all of them yourself. Banks have teams of fraud analysts and these responsibilities are usually divided between them in a way that everyone can effectively perform their job.
Here are some of the managerial tasks that need to performed by fraud risk leadership:
- Given the significant volume of cases, managers have to ensure efficient use of limited resources. Budgets have to be maintained and timelines have to be met.
- Senior fraud analysts have to manage and oversee teams of professionals and ensure efficient time utilization.
- Junior staff have to be trained to perform their roles by senior fraud analysts.
- At a broader level, the fraud analyst has to support the company in advancing its product objectives of achieving profitability.
- Senior fraud analysts also perform an advisory role for the management of the bank when it comes to setting risk appetite and thresholds.
Qualifications and Skills
Accounting, audit or risk management experience – This is usually considered the most relevant experience for entry level fraud analysts. There is significant convergence in terms of skills and at the lower levels its easy to move between these roles.
Fraud analysis is not really an entry level role. Most openings require experience ranging from 3 to 6 years for the entry level roles.
Product knowledge – You need to have a deep understanding of how financial products work. For example, if your responsible for wealth management or retail banking fraud protection, then you really must have those things work in the first place.
Understanding of risk concepts – As stated earlier, fraud is essentially a competent of operational risk and having a deep understanding of risk management principles is going to be an important factor in the performance of your role.
Innovation – The reason fraud occurs is because criminals come up with new and innovative techniques to game the system. In order to stay ahead of the curve, you have to beat them at their own game and counter any innovative tactics before they’re even employed.
Technical Skills – Experience with Excel, SQL is necessary as you are dealing with a lot of data and experience with Python, R, etc. is also considered helpful.
How to become a Fraud Analyst?
Fraud risk analysts are usually required to have an accounting degree or a professional certification like the CPA. It is not mandatory for all roles, but it is generally the more appropriate degree for such a profession. By being a certified chartered accountant, you will add much value to your CV and will greatly increase your chances of a shortlist. You should also expect to be paid much better with a recognized accounting certification.
Other degrees that are acceptable are finance, business and economics. Academics alone are not sufficient though and some experience is required for most fraud analyst roles at banks.
Most fraud analyst roles require a minimum of 1 to 3 years of experience in a relevant field. You can spend a few years as a financial analyst, data analyst or accountant before moving into a proper fraud analyst role. Senior level roles require direct experience in operational risk or fraud management though.
Courses & Certifications
The best online course is Forensic Accounting and Fraud Examination offered by the University of West Virginia. Its a great introduction to the field, takes about 12 hours to complete, is reasonably priced and should give you a taste of what Fraud Risk careers are like. It covers things like cyber crime, money laundering, the how why and who of financial fraud etc.
There are many certifications available but none of them are really mandatory. The more common ones include Financial Risk Manager, Certified Fraud Examiner, Certified Identity Risk Manager, Certified in Risk and Information Systems Control etc.
Most of these certifications are considered “nice to have”, but they can add value if you are applying for an entry level role and want to demonstrate your interest and commitment to the field.
Salary and Bonus
Fraud analysts make around USD 40,000 to USD 70,000 in their first few years on the job. It greatly depends on the bank you are working for and the location. Senior Managers can expect to increase that number to around USD 80,000 to USD 125,000.
At the VP or Director level, you can expect to make around USD 150,000 to USD 200,000. The numbers in Europe and the UK are similar for all roles.
It is important to remember that there are different kinds of fraud analyst roles and they all get paid differently. For example, there are very basic roles which just require you to look at each transaction and approve or decline it based on computer-generated risk analysis. As you can imagine, such rules don’t pay all that well.
Then there more advanced and strategic roles where you’re not looking at individual transactions but rather building the system, identifying and evaluating its weaknesses and making suggestions to make it more robust. These roles require a much higher level of understanding and therefore pay much better.
A Normal Day as a Fraud Analyst
Most fraud analysts spend the majority of their day going through suspicious transactions flagged by automated systems or other staff to figure out if fraud is present. Fraud detection systems are usually advanced enough to sift through millions of transactions in real-time and flag the ones that are suspicious. The fraud analyst has to look at such cases carefully and try to analyze what exactly has happened and how they can help the bank make its systems better.
A lot of time is also spent coordinating with different teams. This might involve collection of data or exchange of emails and answering queries from management or front-end teams.
Some fraud analysts also work as project managers trying to create and implement broader fraud risk management systems. As you can imagine, such tasks are less transactional, and you will spend most of your day in meetings and preparing documents.
Fraud risk analysts essentially have a 9-to-6 job with the average workweek being 45 to 50 hours long. The hours are quite good when compared to almost all banking roles and many banks even offer flexibility in terms of working from home.
Like most jobs though, there are periods when some extra time has to be put in. For example, if a major project is being worked on and you are behind schedule, then you might want to put in some extra hours at work.
Career Path and Progression
Fraud analysis is a rapidly growing field thanks to more and more transactions moving onto online channels. In fact, risk management in itself is a booming field which means that fraud analysts and experts have plenty of career options to look forward to.
Moving up the ladder in fraud risk
- Most risk analysts are expected to have a few years of experience before joining the team.
- You can then expect to be promoted to Manager and Senior Manager level positions with about 3 to 7 years of experience.
- Vice Presidents or Directors are expected to have around 10+ years of experience and this is where leadership skills start mattering more. At this stage, you focus mostly on managerial tasks and providing strategic direction.
- Only the best manage to rise up to the ranks of Managing Director or Head of Fraud/ Operational Risk. These are positions which require not only experience but a proven track record and excellent reputation.
- Beyond this, there are CXO positions available like the Chief Risk Officer. However, the CRO position requires comprehensive understanding of risk which means that you will ideally have weaved your way through multiple risk departments rather than just rising up through the ranks in just one team.
Moving between risk teams
Many fraud analysts move to roles like compliance, credit risk, governance and control and vice versa. The goal here is to gain a comprehensive understanding of all risks facing the business in order to gain the necessary experience for senior leadership roles like the Chief Risk Officer. Senior level positions are usually consolidated and therefore having a broader understanding of risk is more beneficial to career growth.
Moreover, switching between risk and compliance roles also offers some much-needed variety and can also fast-track your career. For example, there might be a senior level position open at your bank or some other bank in a different role for which you still qualify. Therefore, by being willing to move across roles you can increase your pool of available jobs.
Another popular and interesting career choice is going into risk consulting. The truth is that despite being rather critical to the bank’s operations, risk management is still a support function at banks. This means that compensation is not as good as the front-end revenue generating teams.
This problem can be eliminated by moving into a risk consulting role. As a risk consultant, you become a revenue generating asset for your consulting firm. Many of the smaller banks have limited resources and small risk management teams. Risk consultants are hired on an ad hoc basis in order to help such banks with periodic reviews or upgrading their risk management processes.
All of the large consulting and accounting firms have risk consulting divisions. However, if you would like to be part of a smaller team then that is also possible and it’s not unheard of for 3-4 senior level risk consultants to form their own practice.
Non-Bank Fraud Risk roles
Fraud risk is not just limited to banks and financial institutions. Many companies which have high transaction volumes have fraud risk teams of their own. Being open to moves into such roles can be beneficial as bank fraud analysts are usually considered valuable assets at such companies.
You can often fast track your career and get some nice increments when considering such lateral moves between industries. It might not be possible for everyone or in every location, but it is definitely a viable career path.