Customer Risk Rating Framework

Block out the money launderers with better customer risk-rating models that use simplified model architecture. Fix underlying data and using machine-learning algorithms to identify high-risk behaviour.
Money laundering is a serious problem for the global economy, with the sums involved variously estimated at upto 5 percent of global GDP. Customer risk-rating frameworks and models are one of the primary tools used by financial institutions to detect money laundering. As a part of customer risk management, financial institutions (FIs) such as banks and insurance companies assess Customer Risk Rating to get a measurable evaluation of risks associated with a customer.

Generally, evaluation of customer risk rating begins at the time of customer onboarding and continues throughout the customer’s engagement with the bank. CrossFraud® suite provides a framework for evaluating customer risk-rating. The framework can be integrated with the CrossFraud® Enterprise Fraud Risk Management System and CrossFraud® Anti Money Laundering Solution for a comprehensive integrated solution to fight financial crime. Read on below to know more.

How it helps banks

The risk rating of a customer can be used in multiple systems of a Bank for various purposes such as at the time of issuing a credit card, sanctioning loans and advances, opening a new account for an existing customer or increasing limits on withdrawal, overdraft etc.

The Customer Risk Rating Framework can be used in the CrossFraud® Enterprise Fraud Risk Management System and CrossFraud® Anti Money Laundering Solution.

For configuring fraud models or scenarios for fraud detection, you can use Customer Risk Rating Framework to set different thresholds in a rule condition based on the customer risk rating, like applying a rule only for high-risk customers or medium-risk customers and not for low-risk customers.

For alert scoring, i.e computing the transaction risk score, you can use Customer Risk Rating as a factor, and for alert prioritization you can use CRR to increase the priority of alerts on high-risk customers.

Role and Permission

When integrated with CrossFraud® Enterprise Fraud Risk Management System or CrossFraud® Anti Money Laundering Solution, access to the Customer Risk Rating Framework is controlled according to the roles. A Maker-Checker review workflow is implemented to ensure checks and balances in assessing the customer risk. The CRR framework provides a set of risk indicators, each assigned with a certain weightage. Some indicators may be classified as the presence or absence of the risk and some indicators may be further classified into multiple levels.

Risk Indicators

Risk indicators are identified in terms of data points collected from the CBS or any other input method and are classified under Static and Dynamic risk indicators. Static Risk Indicators reflect a customer’s demographic profile like the type of customer, nature of job, the geographical area of business operations, etc. Whereas Dynamic Risk Indicators reflect the nature of transactions of the customer like the number of cheques returned, percentage increase in the cash transactions, whether the customer attracted any negative press, etc

Customer Risk Rating Calculation

Customer Risk Rating is calculated at 2 instances, at the time of on-boarding and as an ongoing process. During on-boarding, CRR is calculated based on the customer demographic profile. As there are no transactions, risk rating is influenced only by demography. As an ongoing process, once the customer is on-board the system takes transaction patterns into consideration for evaluating the Customer Risk Rating.

WHY CHOOSE CROSSFRAUD

Identify risk indicators

Identify risk indicators in terms of data points collected from the CBS or any other input method like file or database table from the Bank

Compute customer risk rating

Establish a method to compute customer risk rating from the risk indicators identified from customer details and transaction data.

Establishing a process for risk evaluation

Enables evaluation of risk at the time of customer onboarding, which is a one time process, and also during ongoing customer transactions, while displaying the risk rating in the GUI dashboard.

Recalibration Mechanism

Establish a frequency of risk evaluation, build rules in configuring patterns for fraud detection, and prioritize alert based on rules. The CRR evaluated can be used in the CrossFraud® Enterprise Fraud Risk Management System and CrossFraud® Anti Money Laundering Solution.