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 Jason Pierce, CPA, CMA, CFM, CVA, MAFF, Senior Vice President, J.S. Held LLC.
What is the state of financial crime today?
In a word: Increasing. The pandemic created opportunities for criminals to capitalise on more people working from home and their reliance on technology. While the median fraud loss from businesses decreased from $150,000 in 2016 to $125,000 in 2020 and total losses decreased from $6.3B to $3.6B, respectively (See ACFE Report to the Nations, 2016 and 2020), this does not properly reflect the increased opportunities from COVID. The Coronavirus P&RSA Act provided over $400B in grants and loans, which included approximately $800M in PPP funds. This created many opportunities for fraudsters to obtain funds. Worldwide, the G20 countries committed to spending $21B to fight the pandemic in 2020, which emphasises the scale. The SBA has addressed many of the fraud detection challenges after “lowering the guardrails” to expedite the COVID-19 process.
While financial crimes are increasing, so is enforcement. The Department of Justice recently obtained a guilty plea in the Northern District of Georgia regarding a $6 million fraudulent PPP scam. Operation Trojan Shield also resulted in 800 arrests through a collaboration between the US FBI/DEA, Europol and other global organisations.
How has financial crime evolved over the past 5 years?
The convergence of cyber, fraud, and money laundering on a global scale create opportunities for criminals. Destabilisation in Russia, the rise of China, Brexit, and the US Election have created systemic changes that can be exploited. Also, more people are reliant on their devices and less attentive to cyber security concerns. Public Wi-Fi’s, Bluetooth technology, and payment platforms all contribute to ways criminals can access devices or accounts.
The ability to hide money globally has declined through regulation and investigations. The FBI participates in several working groups, including the Financial Fraud Enforcement Task Force, which coordinates the efforts of the Department of Justice at all levels of government to disrupt and dismantle significant large-scale criminal enterprises. While the techniques may change over time, the fraud tree and related branches have not. Tips still rank as the top way to identify fraudulent activity.
What’s the future of financial crime?
Financial crime will become more personal through the increasing acceptance of cryptocurrency, in-app purchases, gaming platforms, tokens, NFT’s, etc. In addition, smart devices create opportunities for enterprising thieves. While a smart refrigerator may not have direct ties to someone’s bank account, the data generated by the device is valuable and may be sold to third parties, mined for patterns, or used to gain insight into personal lifestyles. That said, the ability to track currency will increase as people leave more digital footprints and the ability to follow the money improves. This is especially true with blockchain technology. The Biden administration is also looking to fund spending increases through collections which means more taxpayers will be audited. This may mitigate some of the long-term damages from financial crime should this come to pass.