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 Hyunjung So, Senior Financial Crime Compliance Analyst at Goldman Sachs.
What is the state of financial crime today?
Today, financial crime is all across the board and it is not a surprise that firms around the world are implementing the systems and policies to detect financial crimes. Digital payment growth was expected to produce 726 billion transactions annually in 2020, however, because of the pandemic, this number appears to be an underestimate. The massive shift of digital payments has opened new opportunities for criminals to benefit and has led firms to numerous threats of fraud, money mule schemes, identity theft, money laundering, and more.
During the COVID-19 pandemic, national lockdowns and remote working has caused a reduction in cash use and quick adoption of digital payments. In light of this, it changed how criminals operate and individuals, banks, and institutions are facing challenges to manage financial crime risk. While AML regulations vary by jurisdiction, firms are developing systems and policies under the risk-based approach recommended by the FATF to combat financial crime.
How has financial crime evolved over the past 5 years?
Financial crime over the past five years has increasingly become of concern to governments and companies across the world. The total number of Suspicious Activity Report filings increased to about 2.5 million in 2020, compared to about 1.66 million in 2014. In the past, the most common financial crimes were money laundering, terrorist financing, tax evasion, embezzlement, corruption, and identity theft. However, in recent years, especially with COVID-19, the spectrum of the crimes have expanded to cybercrime and various fraud activities such as push payment fraud and unauthorised remote banking fraud. In the information age with cybercrime and fraud on the rise, criminals continue to be innovative and make it more difficult for the global economy to track it down.
What’s the future of financial crime?
As we move into a digital world, criminals will continue to target businesses to execute illicit activities. It will be an ongoing challenge for companies and individuals to identify and manage financial crime risk. At the same time, individuals, banks, and institutions will continuously increase awareness in a risk-based approach.
Lastly, as a future defense, it is important for the firms to continuously perform gap analysis when new regulations or changes are released. The program must be strategically designed and balance the evolution of financial crime with implementing the changes and regulations. Financial crime compliance should be flexible, collaborative, and smarter with the use of technology and data.