Fraud and financial crimes have generated a great deal of headlines over the past two years. From Ponzi schemes and investment scams to money laundering, financial institutions are being challenged today more than ever.
Government intervention and regulations are a first step to help fight the risks and challenges that are out there. However, technology will also play a key role in financial crime management moving forward, as institutions need the appropriate resources and tools in place to combat the ever-changing landscape of fraud.
Many institutions have stepped up efforts to monitor and detect fraud in the current environment. With constantly emerging threats and regulations, many banks and financial institutions have had to quickly implement plans to monitor, detect and manage financial crimes. Rules-based financial crime management technology has shown great promise, as it ensures that an institution's policies and procedures are in the system and are fully auditable.
Rules-based financial crime management technology also automatically identifies links between seemingly unrelated suspicious alerts and events and prioritizes higher risk activity. This ensures compliance to regulations while mitigating risk more quickly. If the organization identifies new risks, the solution can reflect such rule changes immediately or at a predefined date and time.
Financial institutions and insurers see financial crime management as a strategic initiative now. A lot of compliance is pure cost. There is no profit in compliance other than protecting yourself from regulatory scrutiny and stopping losses. However, if you don't have antifraud controls, the losses for most financial institutions and insurers exceed tens of millions of dollars in terms of the amount written off to fraud.
Fraudsters will test a bank to see what they can get away with. For example, they may start off with small-value transactions in order to see how far they can get, and wait to see if the transaction hits the detection system and is recognized as a threat. Through the use of auto-triaging technology, financial crime management systems are able to identify any related events and activities by automatically identifying a transaction or set of transactions as high-risk.