This article is part of Kyckr’s new Future of Financial Crime Series, which features interviews with leading industry professionals and thought leaders to learn more about the evolution of financial crime and the trends shaping the future.
The following is an interview we recently had with Alexa Serrano, CAMS, AML specialist, Banking Editor at Finder.
What is the state of financial crime today?
As the financial industry changes, financial criminals continue to adapt. Many of the avenues of crime aren’t new. For instance, cheque fraud isn’t new. But during the pandemic last year, we saw criminals adapting this method of fraud by impersonating the IRS and sending mailed stimulus cheques to vulnerable Americans. Also, in 2019, the FTC Consumer Sentinel Network Data Book reported that 650,572 reports out of 3.2 million were related to identity theft. And in 2020, fraud and identity theft were up by 20.1% compared to the last quarter with credit card fraud accounting for 41.78%.
Although technology can be used as a tool to fight financial crime, it can also be used as a vector for crime. More and more, we’re seeing an increase in not only phishing emails but also text messages stating that they’ve either tried to deliver a package or that fraudulent activity has been spotted in their financial account.
How has financial crime evolved over the past 5 years?
Technology has a lot to do with how financial crime has evolved. In banking, we’re seeing a larger increase for digital banks, fintech companies and cryptocurrencies. As different avenues start to become more popular, criminals find a way to exploit the system. For instance, as the Financial Crimes Enforcement Network sets new regulatory standards, jurisdictions interpret it differently which may make way for lax compliance regulations. In turn, criminals use this to their advantage by moving money through weaker jurisdictions.
What's the future of financial crime?
In 2020, we saw a call to reexamine anti-money laundering and counter-terrorist financing laws so that they’d be up-to-date for new emerging threats and technological innovations. In January 2021, the Anti-Money Laundering Act (AMLA) came to pass. This Act is intended to help move the focus away from just a US regulation to a more global perspective. But although this Act passed, it may take years for financial institutions to start adapting to it.
Another way we might see financial crime growing is in artificial intelligence (AI). We already see how machine learning and AI could prove to be helpful, but again it can be misused in the hands of criminals.
For instance, we’re seeing an increase in deepfake technology. This technology can impersonate not only someone's face but also their voice. If the future sees an increase in more digital banks and less in-person banking, financial institutions will need to make sure to create better tools to verify their customers.