Data Snacks, Fraud

Fraud and AML investigations are taking more time, but financial crime is getting faster

  • Money laundering in the US makes up 15% to 35% of all money laundering in the world.
  • Spending more time investigating financial crimes comes at a cost, yet most organizations are reporting increased timeframes. The criminals however are getting faster meanwhile.

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Fraud and AML investigations are taking more time, but financial crime is getting faster

Cutting down on fraud and money laundering is a cat and mouse game. Money laundering in the US makes up 15% to 35% of all money laundering in the world. Around $800 billion to $2 trillion is laundered globally and $300 billion of that amount is laundered in the US.

As far as fraud is concerned, in 2021 “check-washing” made a comeback, where fraudsters steal checks, wash out the name and gain access to the funds using false identities. Q6 Cyber found at least 30 channels on Telegram which curated the latest tips and tricks that enabled bank fraud. The biggest of these groups had 20,000 members. In 2022, the number of  Suspicious Activity Reports (SARs) related to check fraud reached over 680,000, according to FinCen

Meanwhile the advent of new payment methods like real time payments make the job of catching fraud and money laundering even more difficult. More than two-thirds of bank leaders are concerned about their firm’s ability to handle fraud, regulatory changes, and money laundering activities quickly, according to a report by Forrester and BioCatch. Apart from being a strain on a bank’s financial resources, fraud and money laundering also pose reputational risks, worrying 61% of bank officials about the effect such activity can have on their organization’s name. 

Pie charts showing how concerned bank officials are with Fraud Activity, changes in regulatory requirements, and money laundering. High levels of concern are shown for all categories with 78% reporting concern about fraud activities.
Pie charts showing what level of risk market forces like fraud and mule activity, regulatory changes pose to financial institutions. High levels of risks are reported with the highest level of risk reported in the category of financial risk.

The report also points out that responding to money laundering quickly is essential. However, 69% of organizations report experiencing an increase in the number of days spent on investigations. And each day comes at a price, with 75% reporting that each additional day poses more financial risk to their organization. 

With costs and financial risk increasing with time, early detection can significantly improve matters, however 60% of officials report that their firm has trouble responding to instances of crime early. 

According to the report, one area of friction is the separation between Anti-Money Laundering units and Enterprise Fraud Management units, despite the two having significant overlap in the data they use and their objectives. This separation can lead to added cost and time and limits visibility and information sharing. Integration of these two functions across the people, processes, and tools used can considerably increase the efficacy of fighting fraud. Only one-third of organizations say they have full integration across both teams, though.

Ready or not, here comes financial crime

Regardless of how well-equipped financial services are in regards to dealing with money laundering and fraud, financial crime isn't about to slow down. In 2022, banks reported 460,000 cases of check fraud across America.

Similarly unstoppable is the innovation in the financial and tech industries. Customers' affinity for novel payment methods like P2P payments or real time payments is real and is likely to persist in the years to come. In 2022, 1.8 billion real-time transactions took place but the number is expected to grow, hitting 8.9 billion by 2026. With real-time transfer of funds comes real-time fraud, and tried and tested criminal methods like phishing and using compromised business emails can be executed much faster. Since payments are transferred in real-time, the window to conduct thorough checks has disappeared. 

These changes in the payments space act to strong arm banks into a position where fraud and anti-money laundering checks have to be performed within fractions of a second. Removing silos between anti-money laundering and fraud teams may soon be an important way forward. 

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