Financial crime has existed for as long as money has. Although we’ve come a long way from hiding grain underground, but financial criminals still follow the same principle of anonymity and hiding.
Transnational financial crime is good business. A recent article by Global Financial Integrity, reported that it is valued to be between US$1.6 trillion to US$2.2 trillion in 2017 11 different markets.
The report took a closer look into several groups, including the FARC (Revolutionary Armed Forces of Columbia), the Islamic State and the Lord’s Resistance Army. These groups reportedly used criminal markets for personal wealth gain and power play. They allegedly “front” anonymous (shell) companies (i.e. companies that have obscured their ownership in order to allow beneficiaries to operate more “freely”), to help hide their identities, criminal activities frustrate active law enforcement investigations and run money laundering. The International Consortium of Investigative Journalists (ICIJ) and OrganizedCrime and Corruption Reporting Project (OCCRP) have also found this to be true in their ongoing investigations into global corruption and financial crime. Criminals have worked around hard-to-detect areas for money laundering in trade finance and correspondent banking. Financial fraud is also made easier considering the many banks have limited ‘know your customer’ systems and processes, leaving them vulnerable for exploitation.
So how can financial institutions stop financial criminals in their tracks?
Connect the dots faster and deeper with artificial intelligence and machine learning
It may seem obvious, but criminals increasingly lean on technology. As technology trends accelerate, even an anti-money laundering army of analysts and investigators are no longer able to keep pace. These transactions now happen in an instant, making it hard to detect that quickly.
The trouble with digital disruption is that there is too much data. Luckily, artificial intelligence (AI) and machine learning solutions are getting to a point where they can run complete analyses and automated decision-making across vast volumes of transaction data.
Spotting anomalies is crucial. However, it is not useful until they are string together to make sense. This is where graph technology comes in. The use of network analysis and data visualization allows for the exploration of relationships between entities of interest such as organizations, people and transactions, easier entity resolution, single customer views and the visualization of patterns and relationships. This is important during transaction monitoring and investigations in helping the anti-money laundering team understand what the data truly means.
Use regulation as a jumping-off point
While regulation is everywhere in financial services, these regulations rarely align globally or reflect the sophisticated financial crime threat that today’s institutions have to deal with. Financial institutions will need to use regulations as a starting point, rather than as the end point, to ensure that their processes and rules are as up-to-date with criminal activity as possible.
Financial compliance need not be a frustrating customer experience. Find out more: https://blogs.oracle.com/financialservices/financial-compliance%3A-the-foundation-of-banks’-customer-experience
Collaborate to fight financial crime
The financial services community needs to come together to build strength and resilience in numbers.
Financial criminals do not work under a single structure. They scatter across clans, cells and networks. But, the crimes they commit are the same.
Regulators and financial service providers need to band together to combat any criminals or patterns of corruption. In the likely event that it is taken up to criminal trials, it will easier to judge them under an effective legal system across different borders.
Ultimately, the interconnectedness of the global financial system means that financial crime and money laundering is only going to get more complicated, far-reaching and sophisticated. However, with the right tools, the right processes and the right collaborative approach, financial services firms can take on these criminals from a position of strength.
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