The Financial Crime Fightback: Lessons Learnt From The Pandemic

  • Andrew Davies, Vice President, Global Market Strategy, Financial Crime Risk Management at Fiserv

  • 24.06.2021 04:00 pm
  • #cybersecurity

Financial crime is evolving, adaptable, and pervasive. Criminals will always look to capitalise on any uncertainty or unrest to commit fraudulent acts against those who are vulnerable and unprepared, be they everyday consumers, small local businesses, or huge international organisations. The COVID-19 pandemic has presented yet another opportunity for criminals to do just that. Financial institutions have a vital role to play in the prevention and fightback against such financial crime.  

Fiserv asked fraud prevention professionals from across EMEA for their views on the state of financial crime in the light of the pandemic, reflecting on what they have seen and learnt since its outbreak. The findings, analysed and reported by Themis, found in full here – Fiserv Financial Crime Survey 2020 – drew to four main areas of focus.

The pandemic emphasises new and emerging threats

Among survey respondents, 61.4% indicated the pandemic has been a catalyst for new threats.

Respondents cited fraud (42.1%) and cybercrime (24.6%) as the two main areas of criminal focus during lockdown. The two types of fraud most frequently cited as a worry for Fiserv survey respondents were personal protective equipment (PPE) procurement fraud and COVID-19 bailout fraud, both of which emerged as a direct result of the pandemic. Respondents also worried about several particular types of cybercrime, namely phishing, cyber fraud, digital ID theft and cryptocurrency abuse.

As the pandemic has given rise to new threats it has also increased pressure on regulators and financial institutions to tackle them more effectively.

Education: building an anti-financial crime culture

Knowledge and appreciation of financial crime risks within financial institutions cannot be confined to specialist anti-money laundering and compliance teams. Respondents conveyed a strong message about the importance of an organisation-wide anti-financial crime culture, including at senior management levels, a sentiment echoed by regulators across the world.

Respondents cited some of the most effective ways to instil this culture within an organisation, with increased training, guidance, and advice from regulators ranking highly. The threat of sanctions for senior management came a close second, highlighting the cardinal importance of setting the right tone at the top. The survey uncovered too that nearly three-quarters of respondents said large fines or the threat thereof were not the most effective way to foster an anti-financial crime culture.

Although creating an anti-financial crime culture can be daunting, in the long term it will help to ensure a successful fraud management strategy.

Technology: digitalisation remains top on the agenda

Technology continues to be a crucial part of the fight against financial crime, with survey respondents pointing to clear, positive effects from digitisation. Migrating processes online has saved time whilst also improving results, as 42.3% of those surveyed reported a “notable increase” in their team’s level of detection effectiveness following the introduction of sophisticated new technology. Almost half of the respondents (46.5%) said that artificial intelligence (AI) and robotics are central to their team’s financial crime strategy.

Sanctions screening was cited as the area of financial crime prevention best addressed by technology to date, with Know Your Customer (KYC) and onboarding faring worst. This dichotomy is unsurprising given the range of online sanctions databases and traditionally face-to-face nature of certain KYC tasks like identity verification. However, there is a sense that COVID-19 is accelerating the digitisation of KYC and onboarding, with 70.3% of respondents reporting either a “slight” or “significant” prioritisation of both processes. In addition to acting as a procedural facilitator, technology emerged as a key enabler of education and training for surveyed financial crime teams, specifically via e-learning, online courses and webinars.

Resilience: operational processes are changing

The pandemic has brought much attention to the ability for an organisation to absorb the impact of unprecedented events and test its operating strength. Financial institutions have also had to mitigate the impact of the mass move to remote working, with over 70.1% of survey respondents saying that their teams needed to implement changes to operational processes as a result.

Adverse impacts of the pandemic on operations included reduction in business demand, adaptation to new COVID-19 specific threats, as well as de-prioritisation of some experimental solutions like AI and robotics in favour of more immediately effective methods. On the flip side, however, this time has provided financial institutions with opportunities to review and enhance systems, policies, and procedures, upskill team members, and accelerate the digitisation of manual tasks.

Reflecting on lessons learnt

There are many lessons to learn from the last 12 months, from organisational culture development to technology and resilience. Although the pandemic has created new environments for criminals to operate, it has also provided the springboard for financial institutions to rapidly improve upon strategies to prevent financial crime from happening. By applying what has been learnt, financial institutions are in a stronger place to continue to tackle current and emerging threats.

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