Money laundering is one of those problems that have been around for a long time, and it does not seem that it will disappear. Financial crime dates back to antiquity, and the scale of it only grew with time.
In North America alone, more than $300 billion is laundered every year. Even significant fines do not discourage banks from participating in money laundering because the reward outweighs the risk.
Add the fact that criminals are usually ahead of law enforcement, and you have a situation where fraud becomes more accessible. Organizations struggle to handle AML operations but can create a strategy and prepare by knowing what to expect and current trends.
With the rise of artificial intelligence and software solutions , it should not come as a surprise that AML software is becoming more prominent as well. Its purpose is to identify and stop money laundering activities.
A solution should be available not just in banks. The insurance and real estate sectors can benefit as well. The software analyzes customer data and transactions and flags suspicious activities. Not to mention that a tool may also identify pain points within an organization, offering solutions to areas of vulnerability.
Software that excels in analyzing data in real-time does wonders in reducing financial crime risk, which, in turn, helps with an organization’s reputation and helps avoid potential fines.
Given how fast one wishes to complete a transaction in this day and age, it encourages developers to come up with instant payment solutions. Instant transactions extend beyond just domestic payments. Cross-border payments are just as common.
Criminals exploit the transaction speed. The AML industry is seeking solutions to identify the crime in real-time rather than checking the data post-facto. The change presents the challenge of false alerts due to the sheer volume of transactions. However, this is where the AML software solution comes in, simplifying the struggles.
It’s hard not to mention cryptocurrency when talking about financial crime and money laundering. Not every financial institution is excited about crypto these days. Nevertheless, there are still a fair few people who rely on crypto and treat it as digital assets.
2022 was rough for the crypto industry. Money laundering from RenBridge and various chain-block exploits by Nomad Bridge and others put a halt on the growth and development, making people rethink their interests.
Regulating crypto is already a challenge on both national and international levels, encouraging criminals to take action freely when there is a lack of regulators or if the regulators are not well-versed enough in the crypto world.
Introducing regulations so that a financial institution can stay ahead will take a while, but more and more countries are trying to reduce the AML risk posed by crypto. It is expected that the trend will be on the rise and that cryptocurrency is not going anywhere in the immediate future.
Beyond Financial Services
AML trends are naturally associated with the financial sector. However, anti-money laundering goes beyond banks. Fraud is present in other industries, such as real estate, gambling, art deals, precious metals, etc.
When there is big money involved, you can expect instances of fraud. The United States, The United Kingdom, and a few other countries are leading the charge in adopting regulations to reduce the risk of fraud, covering non-financial industries that still involve high-value goods.
On paper, virtual reality with platforms like Metaverse seem neat and have obvious appealing points. Having said that, virtual reality also presents a challenge for anti-money laundering. It’s hard to think of an immediate AML solution that eliminates virtual reality risks.
Suspicious activity control in a virtual environment complicates fraud prevention since intelligent criminals can cover their tracks more easily in a digital environment. Those who have to chase will need to adapt to the new ways financial transactions take place and find means to stop crime.
Hopefully, the development of smart AML solutions will be good enough to make things easier for financial institutions and other relevant industries. Right now, though, it is still too early to tell. We will just have to wait and see how things develop.
Remote onboarding has been an overall positive since it brought new opportunities to access financial services. Unfortunately, this accessibility also introduces an opportunity for fraudulent activity.
Criminals have new ways to go about creating their strategy. The technology to fake someone’s identity in a digital environment is one of the biggest problems that regulators have to solve.
Deep Fakes are an excellent example. Technology is advancing at a rapid rate, and bad actors gain access to synthetic identity fraud. Organizations have to implement ways to ensure that the person entering the login credentials is the original owner.
Two-factor authentication, fingerprints, and even something as futuristic as an eye scan are all worth consideration. It is about finding a balance between security and customer experience as well. If there are too many steps to take, a user might find the inconvenience too much of a hassle and will not bother.
From a developer’s point of view, adding a new feature to your app makes sense, especially if it improves the overall user experience. The problem is that some developers do not consider how specific features introduce an element of risk.
Some applications add payment services in addition to what they already cover. For a user, it is convenient to have everything in a single app, but it is hardly safe when you chat with friends, order products, and take care of banking-related matters.
Such a hub undermines risk management, exposing users to account takeovers. A communication app that introduces a financial feature is usually not as protected as an app dedicated to finances. Moreover, the user might act carelessly in an app environment mostly associated with leisure/entertainment and has the finance aspect as a secondary element.
Trading convenience for security is hardly a smart approach, but it does not seem to deter users. App developers will have to be extra careful about what they do when presenting new features that introduce risks to the user.
All in all, AML trends are part of an ever-changing landscape, and finding one solution is more or less impossible. Keeping up with the changes and introducing new methods to fend off criminals takes a lot, but it is a must to stop terrorist financing and money laundering.