Faced with insider threats, how do you strengthen defenses from within?

We explore how behavioral analytics and an ethical environment help financial institutions mitigate and detect insider threats effectively.

In brief

• Behavioral red flags and tip-offs are crucial in detecting fraud, emphasizing the need for a strong organizational culture.
• Leveraging culture analytics can significantly reduce insider threats by fostering an environment of integrity and accountability.
• Comprehensive integrity risk assessments and ethical leadership are essential to creating a robust ethical culture in financial institutions.

Insider threats – where individuals within an organization exploit their access to commit financial fraud, embezzle funds or disclose unauthorized information – pose a significant risk to businesses worldwide. This issue is particularly pressing for financial institutions in Switzerland, where there is a legal duty to comply with anti-money laundering guidelines and the financial impact of insider attacks is profound.

The publication “Occupational Fraud 2024: A Report to the Nations” by the Association of Certified Fraud Examiners (ACFE) reveals a staggering 5% of revenue is lost to internal fraud annually, underscoring the substantial financial impact of insider threats. Alarmingly, nearly half of all reported cases involve corruption, highlighting the pervasive nature of this issue.

In this context, the importance of fostering a strong organizational culture cannot be overstated. Tip-offs are the most frequent method of detecting fraud, accounting for 43% of detected cases. This underscores the value of creating an environment where employees feel empowered to report suspicious activities. Additionally, 84% of fraudsters displayed at least one behavioral red flag, indicating the critical role of behavioral analytics in identifying potential insider threats.

While there are multiple ways to approach insider threat management, one often overlooked – yet highly effective – strategy is improving organizational culture through assessment and improvement programs. By fostering a culture of integrity, transparency and accountability, organizations can significantly reduce the risk of insider threats and enhance their overall security posture.

To effectively assess and improve organizational culture, financial institutions should adopt a comprehensive approach inspired by leading industry practices. This includes conducting a thorough integrity risk assessment, drawing on insights from social and behavioral sciences, corporate ethics, and organizational behavior. Key focus areas should include governance, ethical climate, motivation, leadership, decision-making, and trust. It is also essential to measure factors like organizational stress, perception of fairness, and the presence of a speak-up culture.

How you assess culture and integrity will depend on your specific needs and desired outcomes but could include: