This article is part of Kyckr’s new Future of Financial Crime Series which will feature interviews with leading industry professionals and thought leaders to learn more about the trends that will shape the future of financial crime.
The following is an interview we recently had with Moyara Ruehsen, PhD, CAMS, CFCS, Professor of Financial Crime Intelligence and Director of the Financial Crimes Management Program, Graduate School of Int’l Policy & Management, Middlebury Institute of International Studies.
What is the state of financial crime today?
We are facing a perfect storm of factors, some of it due to the pandemic, and some of it due to rapid technological innovation. This has resulted in an exponential increase in all types of fraud, as well as crypto crime, such as ransomware.
We also do not have the resources to investigate and prosecute all of these criminals. That is what I find most discouraging. Yes, the financial sector can always step up its game by improving the quality of SAR filings, but even today we don’t have enough investigators at the local or federal level, who are able and willing to pursue even a fraction of the actionable intelligence in the many high-quality SARs that are already being generated as we speak. That is the sad reality.
How has financial crime evolved over the past 5 years?
Even before the pandemic, we were seeing increased digital transactions, new payment platforms, more remote work, and remote onboarding of customers. The pandemic just accelerated that trend. And regrettably, we still have major deficiencies in beneficial ownership transparency, even in OECD jurisdictions, and the regulators have not been keeping up with new technologies.
The cleverest criminals are evolving new techniques to exploit these regulatory deficiencies. And they are getting better at disguising themselves and crafting more effective social engineering techniques to harvest data and/or login credentials.
The other trend I’ve noticed in recent years is the increase in transnational crime. If we look at some of the financial crimes committed by Nigerian and Russian criminal enterprises or North Korean state-sponsored groups, their victims are from all over the world, and the stolen funds are typically laundered through multiple jurisdictions. That complicates matters for law enforcement.
What’s the future of financial crime?
These trends (increased digitisation and increased transnational nature of crimes) are likely to continue. For the past three years I have been teaching a course on Cyber-Enabled Financial Crime, but soon I think that term, “cyber-enabled” will be moot. Most financial crimes today have a digital component, and soon they all will. Increased digitisation also means that victims on the other side of the world are easily reached by criminals anywhere.
How do we step up our financial crime fighting game in this new environment? Two things have to happen.
First, investigations will only benefit from more public-private partnerships and inter-agency collaboration. We should also find safe and trustworthy ways to collaborate more with our foreign counterparts. Fortunately, this is already happening. We should do more of that.
Second, the increasing sophistication of criminals means that investigators need to become more sophisticated, too. I’m not only talking about things like advanced data analytics, machine learning and blockchain forensics, which we hear a lot about. An effective investigator should be apprised of these tools, but they also need to have general knowledge about the world. Knowing something about geography or what a country typically exports, is important for recognising whether a trade pattern is unusual. Cross-cultural and language skills help too, especially when accessing a corporate registry or doing due diligence on a PEP.
The bottom line is that we’re seeing increasing complexity on the part of the criminals, and financial crime fighting professionals need to advance their own skill sets to keep up with that complexity.