The Evolution of Fraud and Financial Crime
Fraud and financial crime adapt to developments in the domains they plunder. (Most financial institutions draw a distinction between these two types of crimes: for a view on the distinction, or lack thereof, see the sidebar “Financial crime or fraud?”) With the advent of digitization and automation of financial systems, these crimes have become more electronically sophisticated and impersonal.
Bringing together financial crime, fraud, and cyber operations
At leading institutions, the push is on to bring together efforts on financial crime, fraud, and cybercrime. Both the front line and back-office operations are oriented in this direction at many banks. Risk functions and regulators are catching on as well.
All risks associated with financial crime involve three kinds of countermeasures:
- Identifying and authenticating the customer,
- Monitoring and detecting transaction
- Behavioral anomalies, and responding to mitigate risks and issues.
These activities have taken in response to fraud, cybersecurity breaches or attacks, or other financial crimes, is supported by many similar data and processes. Indeed, bringing these data sources together with analytics materially improves visibility. While providing a much deeper insight to improve detection capability. In many instances, it also enables prevention efforts.
Strategic prevention: Threats, prediction, and controls
The idea behind strategic prevention is to predict risk rather than just react to it. To predict where threats will appear, banks need to redesign customer and internal operations and processes based on a continuous assessment of actual cases of fraud, financial crime, and cyberthreats.