There are many elements of life that have been profoundly affected by the coronavirus pandemic. Some we will learn to live with, others will revert to how they were, and some we will embrace for the better. What’s certain is that we must adapt our stance in a world that is constantly changing.
Banking on AI: The Opportunities and Limitations of Artificial Intelligence in the Fight Against Financial Crime and Money Laundering
Financial crime has thrived during the pandemic. It seems obvious that the increase in digital banking, as people were forced to stay inside for months on end, would correlate with a sharp rise in money laundering (ML) and other nefarious activity, as criminals exploited new attack surfaces and the global uncertainty caused by the pandemic.
The pandemic has helped to fuel an increase in fraudulent activity, with more people engaging and transacting with organisations online. In the banking industry this has been borne out by figures from the Office for National Statistics (ONS) which has found a 68 per cent increase in remote banking fraud in 2020.
Growing Enforcement of Environmental-Crime Legislation in the UK: What Are the Implications for Banks?
The enforcement of environmental-crime legislation is evolving in the UK—and the pace is set to quicken, with inevitable implications for financial firms and investors. Increasing enforcement sophistication and AML risks, focus on supply-chain due diligence, and ESG and regulation are three ways in which risk is changing for the industry.
The UK has long been regarded as one of the most regulated countries in the world when it comes to the financial services sector. Arguably much of this has been driven by membership of the EU, and the numerous money laundering directives we’ve adhered to over recent years. However, the UK will still be one of, if not the most strictly regulated countries even after Brexit – as the City of London needs to continue to be seen as beyond reproach as a financial institution.
Crises bring out the best in humans, and that has certainly been evident during the COVID-crisis, especially with banking, which has risen to the challenge more successfully than many expected. Sustaining the momentum post-pandemic will be critical, as economies struggle to recover. To remain robust and profitable, banks will need to pay particular attention to key areas such as transforming costs and reimagining customer relations, aided by talent and innovations.
Finding the perpetrators of crimes is a taxing task in terms of time and money; however, regulators require banks to comply with AML and KYC regulations or pay penalties. Data is key to uncovering the criminals who exploit banks for illicit purposes, but employing data to best advantage is easier said than done. Tools such as entity resolution and network analytics make the process much more trustworthy and less costly.
Compliance is a word that all companies, especially financial firms, need to know but is one that is not always enduring to boards and senior management. After assigning compliance officers the task of designing the compliance program, many executives lose interest and move on to more compelling concerns. But considering the potentially devastating risks to reputation and profitability of non-compliance, an effective compliance program requires continuous engagement, support and investment.
Rapid leaps forward in cross-border payments have led to significant reductions in processing times. This is great for customers but also leaves windows of opportunity open for cybercriminals, such as money launderers and fraudsters. The responsibility to remain compliant with financial-crime regulations weighs heavily on banks as it becomes more complicated, but the SWIFT network is going all out to help in the effort to ensure swift but legal transactions.
Financial institutions, coping with a tsunami of concerning issues, must face the reality of a more coordinated tidal wave of AML regulations, which regulatory regimes worldwide plan to enforce. The risks of disciplinary actions are too great for C-level and board members to ignore, so what developments do they need to know and what steps must they take to protect their companies, and themselves, from the consequences of compliance failure?