As more everyday activities have shifted online due to the COVID-19 pandemic, criminals have adapted their tactics and pandemic related scams are on the rise.
Andrew Davies is vice president, global market strategy, Financial Crime Risk Management at Fiserv, a global provider of financial services technology. In this article, Andrew outlines best practices that financial institutions can implement to improve fraud and financial crime risk management, and why collaboration is key to detecting, preventing and mitigating financial crime while delivering a positive customer experience.
The COVID-19 pandemic brought out the criminal opportunists. To detect and prevent financial crime in its tracks, financial institutions have to act fast, be flexible and efficient, without compromising the customer experience. The stakes are high. Money laundering and financial crime affect the global financial system in its entirety, cause serious reputational and business losses for the individual organisation, as well as exacerbate broader social issues like human trafficking.
To combat financial crime effectively, now and in the future, financial institutions need to continually adapt financial crime and risk management practices. The key to this is collaboration. Three main parties must work well together to protect financial institutions and their customers: regulators, internal teams and the industry at large.
Regulators across the globe are encouraging the use of new innovations to help uncover suspicious activities and increase the effectiveness of compliance efforts, with the goal of reducing financial crime.
Many regulators are allowing experimentation or supporting innovation hubs to help financial institutions monitor and deter financial crime in real-time. And government bodies around the world, such as the UK National Fraud Intelligence Bureau and the US Federal Trade Commission, have published new and evolving scams to facilitate monitoring and detection.
The pandemic has created a unique environment that both regulators and financial institutions must continually navigate. And they have always been on the same side. By focusing on mutual goals – protecting people, organisations and the financial system – collaboration can happen more openly and effectively to improve processes and fight financial crime.
Financial crime and risk management is the responsibility of everyone in an organisation. From customer-facing roles through to the back office – all need to be aligned and trained on the organisation’s risk-based approach and on identifying potential financial crime red flags.
To truly understand and mitigate risk, a financial institution needs to apply all the data that is available to it from all departments within the organisation. As data proliferates, financial crime management teams need help with constant monitoring. While technology can do a lot of the work, it is important that everyone within the company understands the significance of this information and its ability to help prevent and detect financial crime.
Internal teams are fighting financial crime against a complicated backdrop. Thanks to digital transformation, we have faster payments, more channels and more data. The challenge and opportunity, afforded by increasing data, are more than any single leader or department can handle.
To truly protect the financial system – and protect real people from crimes such as human trafficking and drug trafficking – the industry needs to work more collaboratively. Some legislation and government initiatives allow, and even encourage, institutions to share information. It is time to go beyond that to manage risk effectively and proactively.
The financial industry needs a framework for sharing experiences and data more openly with peer institutions and regulators. While this comes with challenges, such as maintaining data privacy and integrity, it is important that organisations maximise their use of data. Working together is crucial to strengthening the overall financial system.
The financial industry is smart. By coming together, the industry can figure out, and teach one another, how to improve crime prevention, detection and remediation.
The Road Ahead
Financial crime is forever evolving at speed, whether that be during a pandemic and beyond. The current situation can be used as a great opportunity to build out financial crime and risk management practices that will enable institutions to be future-ready. With the right technology, financial crime can be fought and managed more effectively. Using data, detection and prevention enables institutions to fight back faster. But it’s through collaboration that we will really win. A collaborative approach among regulators, internal teams and across the industry means the whole financial system can be protected.