Criminals make use of financial institutions to launder and hide assets gained from theft, drugs or even human trafficking. Banks play a key role in protecting the legitimate economy from illicit activity, but in order to turn the tide on financial crime, they must first be fully aware of the threats they face. In this article, we've listed the seven most compelling threats in today's banking landscape.
1. Market turmoil
While the financial sector navigates a rocky post-COVID-19 recovery, criminals can benefit from the chaos in the global economy. Supply chain challenges, soaring energy prices and rising inflation are all linked to increases in the volume of financial crimes.
2. The cost of compliance
Did you know that the global banking sector spent more than USD 200bn on compliance checks in 2021? The complexity of regulation places a burden of manual labour on financial institutions, and in the Netherlands, the banking industry is only just starting to deploy modern technology to fight financial crime.
3. Tightening privacy laws
Teams focused on tackling financial crime have the additional challenge to ensure that data protection laws do not thwart their efforts. For example, the EU's GDPR may prevent banks from effectively exchanging data on criminal actors. When compounded by various other systems, these laws can inadvertently help cross-border criminals to evade justice.
4. The plight of the 'unbankables'
Today's modern economy necessitates access to basic banking services, but rising service charges and a complex risk landscape can leave some customers locked out.
For example, cash-intensive businesses present a high risk to banks, who use high service costs are used to discourage illegal activity. However, these charges make bank accounts inaccessible for 2 in 10 adults in the EU15 countries.
5. Cybercrime, spoofs and fakes
Once easy to spot, cybercrime tactics are becoming more sophisticated, such as fake 'bank helpdesk' employees asking for 'secure' payments or emails loaded with spyware technology. These scams cost Dutch residents EUR 48m in damages in 2021. Meanwhile, criminals can also create realistic fake identities through synthetic avatars and 'deepfake' imagery and videos.
6. Legacy mindsets
As consumers seek seamless digital experiences across all the companies they interact with, the ones who do not adopt new technologies will be most likely to lose market share by 2030. This risk is amplified even further when criminals use cutting-edge tools that banks lack the capabilities to fight.
7. Reputation laundering
This financial crime term has emerged in recent years to describe how criminal actors employ consultants, lawyers and other actors to 'rebrand' their reputation and create doubt around their alleged wrongdoing. Flattering media coverage and charitable initiatives are designed to blur the line between legitimate and illegitimate activities, and can even throw anti-money laundering tools off course.
Join the fight back
Sopra Steria's experts work with banks to turn their financial crime challenges into opportunities for resilience. With the right strategy, data and operational solutions, your business can also stay ahead of the game when it comes to preventing and combating crime. Download our whitepaper on financial economic crime to find out more.