How to Stop Financial Crime as a Service


First comes fraud, then comes money laundering.

Ransomware, business email compromise (BEC), phishing and bitcoin as a way to conceal illicit gains – transporting stolen funds across borders is no longer about stuffing cash into suitcases.

Featurespace founder Dave Excell told Karen Webster that the financial services industry is facing the rise of “financial crime as a service”, no different than going online, browsing, clicking and to buy a pair of jeans or to have access to your favorite streaming. media.

Criminal ecosystems take shape as a wide range of businesses support each other in their quest to expand, steal and launder money across the globe.

So nowadays, Excell said, “you can phone someone and pay for a ransomware attack on a certain company. That’s something you couldn’t have done even 18 months ago.

Ransomware attacks have become too common lately and lock down a computer or network until the victim pays for a key or password to unlock their device/network, thus enriching the fraudster.

Criminals are brazen – with cryptocurrency

“Fraud isn’t necessarily hidden behind closed doors and in dark rooms,” Excell said. “It’s much more cutting-edge. We may never know just how pervasive organized financial crime is, as many cases may go unreported as targeted companies fear their brands and reputations will be damaged.

And it’s not just fraud; it is also money laundering and sanctions violations. Recently, there was a criminal conviction of a crypto expert, Virgil Griffith, who helped North Korea evade US sanctions by moving money into Ethereum. The expert showed North Korea how to convert fiat currency to Ethereum, despite warnings from the US government not to.

Read more: Crypto developer gets 5-year sentence for helping North Korea evade sanctions

The conversation took place against the backdrop of the Financial Crimes Enforcement Network (FinCEN) imposing over $600 million in fines for anti-money laundering (AML) violations in just 14 months (from January 2021 to March 2022).

See more : FinCEN praises automated AML systems and digital identity solutions

Yet despite the fines, the problems persist because change takes time, Excell said.

“There’s a lot of inertia around how the industry can get ahead of the crime and fraud that’s out there,” he said.

Advanced technology to the rescue

The deployment of advanced technologies can make it easier and more effective to detect these criminals.

Beyond the technology itself, internal training across financial institution (FI) departments is essential, Excell said. The same goes for proactive outreach aimed at keeping customers and suppliers informed of anomalies in transactions.

But the current environment – ​​where money flows in and out of Russia and other sanctioned countries in order to avoid sanctions imposed on the global stage – shows how difficult things can get for FIs. Cryptocurrencies are of particular concern, he said, as they are used by criminals in partnership with sanctioned nation states to circumvent screening efforts and sanctions – with the main attraction that these digital offerings exist in outside the traditional financial system.

The risk of splitting financial systems

On the broader geopolitical scene, there is the risk that sanctions will create a “divided” financial system, where there is the United States, the euro zone and a number of allied nations – and then there is the whole world. Nations, including Russia, have been able to develop their own internal and local payment systems, providing alternative ways to transfer money (with crypto as a financial weapon).

In order to unearth financial crime, we need to think outside of “traditional” debit and credit cards, ACH payments and wire transfers, Excell said. This means keeping an eye out for cryptos, non-fungible tokens (NFTs), and the ways in which different assets can be traded.

The challenge with sanctions is that banks need to capture “appropriate” individuals without generating too many false positives. These must be reviewed by already overstretched teams who must add sanctions screening to their workload. To guard against these false positives, to help build technological lines of defense against bad actors, FIs need to test and retest new technologies (and reuse old technologies).

There needs to be an awareness among these FIs when money comes from digital exchanges, Excell said. But more robust technologies are coming to market that allow companies to better monitor the wallets of sanctioned individuals and organizations.

“There is more traceability of these funds as they move through different cryptos,” he said.

Traceability can act as a deterrent to cybercriminals, as it can help reveal the real organization behind the money laundering itself.

Looking ahead, he said, the changing regulatory regimes surrounding cryptocurrencies (linked in part to recent orders from President Joe Biden’s administration) will tighten the net around bitcoin and its brethren used as vehicles. money laundering.

Read more: Biden Executive Order Set To Accelerate Crypto Policy

As Excell told Webster: “[T]here, there will be more opportunities to create more holistic oversight of financial services and put an end to financial crime – although there is still some cleaning up to be done.

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