Mobile banking from a personal BlackBerry or iPhone poses new threats to financial institutions as criminals seek to hide their fraud or money laundering crimes behind the relative anonymity of handheld devices.

"Rapid changes in the payments industry - moving from cash and checks to electronic payments and now to mobile banking - not only provide increased convenience and value for consumers but also present new elements of risk and fraud," says Steve Solberg, senior product manager for Fraud at Fortent, the risk and compliance specialist.

The mobile banking channel is projected to explode in the US in the next five years, from 1.1 million US customers in 2007 to 42.3 million in 2012, according to TowerGroup. Mobile initiatives have been even quicker to take off in other countries, such as South Korea, Hong Kong, and Brazil, with companies starting to offer everything from payments to stock trading through mobile devices.

"Banks want to be able to attract and retain the customers demanding this channel," says Solberg, "but they need to have the safeguards in place to ward off criminals trying to creep into the system. The real risk for banks is that we don't know exactly the extent to which financial criminals are going to exploit mobile banking. There isn't a track record of realised risk."

The Growing Threat

"Mobile banking is still in its infancy. While there haven't been major incidents yet of huge losses from the mobile banking channel, banks are gearing up to protect themselves and their customers."

"The potentially devastating results of a major fraud loss make it incumbent on banks to prepare adequately against any new threat," says Solberg.

Mobile banking, along with debit and credit cards, wires, and online bill payments, present some of the greatest emerging electronic payment threats to banks.

Who Are the Criminals?

"The faceless nature of mobile banking makes it attractive for a certain type of criminal - primarily organised crime. These crime groups have a lot of money and can employ financially and technologically sophisticated people, including scientists from former Soviet bloc countries," says Solberg.

Banks Have Been Here Before

While mobile banking presents a unique set of challenges due to security issues surrounding these devices (which often lack the security of PCs), "banks have faced this kind of challenge before," he explains.

"When institutions began to offer online banking, for example, there was a similar urgency to protect that channel, and banks have become very sophisticated with their online controls and monitoring."

Controls Necessary to Contain Risk

"Banks realise that mobile banking is inevitable, and are eager to capitalise on its growth," says Solberg. "But with this new channel, banks must also shore up their defenses with appropriate technological and programme controls to make sure they can offer these services effectively and safely."