Data analytics may be used to identify risky transactions, accounts, and maybe even customers depending upon the business model and quality of the data available for analysis. For example, data analysis of transactions for customer accounts for the last five years that shows trends for accounts that were subsequently identified as being part of fraudulent or criminal activity may be used to set warning notices for current accounts engaging in similar conduct.

Understanding the history of fraudulent transactions from a business may help identify trends that can be used to create alerts to help businesses identify risk. For example, we’re now familiar with receiving alerts when accounts have multiple unsuccessful login attempts or account balances reach a certain level. Understanding the history of fraud or financial crime from a business may help identify trends that can be used to create alerts to help businesses identify risk.

How can banks identify high risk people?

It’s almost impossible for banks to identify high risk people, other than being able to identify high risk transactions.  Any person engaged in a high risk transaction can then be identified as a high risk person.  With the increasing anonymous online transactions, banks must simply focus on trying to identify risky transactions.  The more sophisticated fraudsters and criminals using P2P platforms and cryptocurrency are very difficult to identify, because they use TOR, identity obfuscation techniques, synthetic identities, and various other methods and technology.

However, the transactions can be identified, traced, tracked, and often times can be saved. Banks can use data analytics with various algorithms to help identify high risk transactions, and then collaborate with experienced fraud prevention personnel, policies, and procedures to create an appropriate risk response/prevention for high risk transactions.

In what ways does the post pandemic financial landscape increase the risk of fraud and financial crime?

Stranger = Danger! One of the most significant causes of increase in the risk of fraud and financial crime is that we have newer and more remote relationships. In the post pandemic financial landscape, we have more people working remotely which means doing more business with people with whom we are less familiar.  Companies are hiring remote employees that literally have never been to the business location.  New relationships with unfamiliar patterns substantially increase the risk of fraud and financial crime.

Speed of transactions and the payment cycles increasing also increases the risk of fraud and financial crime.  Businesses are no longer waiting for a check in the mail. Businesses often do not want to even wait 72 hours for an electronic funds transfer or wire to be completed. The development of cryptocurrency is setting the stage for increasing the speed of transactions and payment cycles, which also allows bad actors to hijack the transaction and escape with their ill-gotten gains.  Low tech solution of knowing the person on the other end of the wire, and then confirming before and after the transaction will always be an effective solution to the risk of fraud and financial crime.

Where do you see the fraud and financial crime landscape in the next 5 years?

We’re currently seeing an increase in the speed of transactions and payment cycles using cryptocurrency and P2P payment platforms.  Bad actors will continue to develop and attempt to hijack financial transactions and escape with their ill-gotten gains.  Law enforcement often tells victims, who may have been tricked into sending funds electronically, that if the funds were sent more than 48 hours or 72 hours ago, they are simply out of luck.  I expect within the next 5 years that technology providers will have partnered with regulators enough that there will be reliable P2P platforms and cryptocurrencies to significantly reduce fraud and financial crime by bad actors being able to hijack the transactions.  The main P2P platform and crypto roads will be much safer, but there will likely always be risk and danger on the less travelled P2P platforms and crypto roads.

We should allow for the concern that synthetic identities may be used by more sophisticated fraudsters and criminals to hijack online transactions, even five years from now.  The more sophisticated fraudsters may have enough sensitive personal identifying information to create significant synthetic identities.  Sophisticated fraudsters can use the significant synthetic identities to present credible business fronts and even credible employees. For example, U.S. citizens are already being tricked into answering calls or sending mail as part of human resource scams and the U.S. citizens were hired by more sophisticated fraudsters through a completely virtual hiring process that would appear valid to many.