The past year has been nothing if not transformative. The pandemic has led to a huge increase in financial crime. To avoid detection, criminals are growing more inventive, using deepfakes, social engineering techniques, and creating synthetic online identities.
To stay one step ahead, banks and regulated institutions need to stay on top of emerging financial crime trends across borders in order to address fraud and meet compliance.
Here are our key predictions for the year ahead.
A focus on identity monitoring for banks and fintechs
This year, we identified a 37% increase in social engineering attempts by fraudsters across Europe. It is likely that this will increase in prevalence in the coming year as fraud operations become more sophisticated. Money mules, for example, appear to be perfectly legitimate people at onboarding, but transfer access to the account to money launderers after the account is opened.
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To combat this, banks and other financial institutions must adopt technology that looks beyond document verification at the onboarding stage and continues to monitor customer identities throughout various points in the customer lifecycle.
Crypto in the regulator’s crosshairs
Cryptocurrency regulation has been a hot topic this year. As the year concludes, top US regulators — The Federal Reserve, FDIC and OCC — have already issued a joint statement outlining proposed rules for firms in the crypto space. We expect to see more of this globally in 2022, as the sheer size of the crypto industry will lead to regulators closely monitoring the sector. This could lead to stricter compliance regulation in some markets, creating divisions wherein some players embrace regulation, while others will fight or evade it.
A heightened ethical and security standard for dealing with sensitive data
Society at large has become increasingly interested in and vocal about how personal data is used and stored by technology companies. This will lead to more tough questions asked and answers must meet a high ethical and security bar.
GDPR is quickly becoming the ‘gold standard’ for global privacy. Companies that don’t have the capability to handle sensitive data at high standards will have to either delete the data they hold (as Facebook has recently done with over 1 billion users’ biometric data), or will need to find a partner that can help them meet a higher bar for security.
Banks will also have to be able to explain how AI is applied to compliance and fraud. This impacts vendor onboarding as it requires understanding whether their partners and vendors have full control over the technology they offer. Every bank will need to be able to explain both to regulators and the general public how and why a decision was taken.
Written by Krik Gunning, CEO at digital identity specialist Fourthline
