While internal fraud increases in times of financial turmoil, at the same time executives at financial services firms are increasing the technology they deploy against it. Nonetheless, executives believe internal fraud will only worsen, according to a new report released on Monday by the Aite Group.

In November and December, Aite Group surveyed 35 fraud and product executives at financial institutions across the United States and Canada, finding that over half of financial services firms surveyed attribute at least 5% of their total fraud losses to internal fraud, at a cost of hundreds of millions of dollars. Even though fraud is a significant problem, the truth is most financial services firms don’t want to discuss it given that their business is built on trust in their brand. As a result, 35% of survey respondents reported prosecuting 10% or less of their confirmed internal fraud cases.

Yet financial services firms can take steps to prevent internal fraud, which Aite defines as “a wide variety of criminal behavior perpetrated by a firm’s own employees or contractors, and generally falls into three categories: theft from customers, theft from the firm, and abuse of position.”

“Financial services firms must examine their current internal fraud prevention environment and determine how to bolster it,” says Julie Conroy McNelley, senior analyst with Aite Group and co-author of this report, in a statement. “As competitors develop more robust defenses, fraudsters will migrate to the path of least resistance.”

Some of the fraud prevention technologies that Aite mentions in its report include, 41st Parameter, Acxiom, BlueCava, Detica, Early Warning Services (EWS), Equifax, Experian, First Advantage, FIS, ID Analytics, ID Insight, iOvation, LexisNexis, Memento, NICE Actimize, Norkom, RSA, and TransUnion. Prevention tools include, device fingerprinting that can help pinpoint common devices that are being used by employees and customers; Identity verification screening; and hot lists of known fraudsters.

Those institutions that reported higher rates of fraud also had employee activity monitoring software, which means that those that monitor fraud catch fraudsters. While financial institutions plan to spend more on monitoring technology, they still expect rates of internal fraud to stay the same or increase over the next three years.