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 evolution of financial crime and the trends shaping the future.
The following is an interview we recently had with Florian Haufe, Founder & CEO of Financial Crime Academy.
How has financial crime evolved over the past 5 years?
Over the last 5 years, the emergence of new technologies has opened up countless new ways for criminals to circumvent efforts to prevent financial crimes. Especially the rise of cryptocurrencies and their acceptance in commercial transactions has paved the road for next-level money laundering and terrorist financing schemes.
At the same time, regulators in many countries around the world have tightened their regulatory frameworks to prevent financial crimes and started to account for technological trends. Simultaneously, regulators placed increased emphasis on enforcement actions, including significant penalties and costly remediation programs. Regulators’ activities have shown to not solely focus on banks and financial institutions – like it had been in the past for the most – but on other organizations outside the financial services industry as well.
What is the state of financial crime today?
Both effects – criminal innovation and regulatory pressure – have led to the design of enormous financial crime prevention apparatuses in many large organizations, in particular banks.
While these anti-financial crime programs are effective in many cases, some still fall short in meeting regulators’ expectations or being operative in practice. In either case, most of these programs are costly, cumbersome, and inefficient.
What’s the future of financial crime?
Technology will certainly continue to bring about change. Likewise, criminals will continue to leverage technology to circumvent anti-financial crime endeavors.
To cope with the past and current challenges, organizations need to adjust their anti-financial crime programs to remain effective and, at the same time, significantly improve the programs’ efficiency.
Technology, again, might be part of the solution here as well. For example, current customer screening or transaction monitoring systems often lead to labor-intensive false positive reviews. Advanced network analysis-based solutions could be key to reduce the false-positive rates.
In addition, organizations need to make sure that the knowledge and skills of their employees don’t fall short. Proper, risk-based, and target-group-oriented employee training that does not omit emerging technological trends is inevitable. More often than not does the error sit in front of the keyboard. Why should it be different for financial crime prevention?