Every year, it's estimated that 2 to 5 percent of our global GDP is laundered every year through worldwide financial networks, yet only 1 percent is intercepted. The disruption from COVID-19 has presented even more opportunities for fraudsters to take advantage.
How can organizations fight back? We asked fraud prevention professionals from across the Europe, Middle East and Africa (EMEA) region for their views on financial crime and prevention, particularly in light of the pandemic. All those surveyed for our Fiserv Financial Crime Survey 2020 are experts in anti-money laundering, fraud and financial crime prevention, or general compliance. Financial crime specialists, Themis, helped to analyze responses and develop report outcomes for the survey, which was conducted in the first half of 2020.
The survey revealed four areas of focus.
1. Emerging Threats
Fraud is chameleon-like, quickly adapting to changing circumstances. While 61.4 percent of survey respondents said COVID-19 has been a catalyst for new threats, they also said its effect is small. The true results of an emerging financial threat, however, may not be known for some time.
Beyond the pandemic, cybercrime and fraud through authorized push payments and credits cards remain the top areas of concern, according to the survey. Cryptocurrencies are a lesser concern, although respondents said there is a clear need for a greater collaboration between regulators and financial institutions.
Before you can combat fraud, you must first understand it.
2. Education and Culture
Before you can combat fraud, you must first understand it. Respondents said education is key for everyone along the payment journey – experts, management and the public. Consumers' knowledge provides an increased probability they will report suspicious activity and helps prevent them from becoming victims. Respondents view education as the responsibility of governments, regulators and banks.
New technology is a boon for financial institutions – and criminals. However, respondents pointed to clear, positive effects from digitization, including the ability to migrate processes online, and the effectiveness of crime detection and prevention measures. The survey also highlighted a strong desire for the introduction of technologies using artificial or automated intelligence and robotics to help detect fraudulent behavior.
While COVID-19 has accelerated digitization strategies for some, the outcomes have been variable. Sanction screening fared better than other processes, such as know your customer. Overall, respondents saw the need for regulators to step up their game.
4. Operational Resilience
There's no doubt the pandemic has tested companies' ability to absorb the effects of disruptive events. While there have been ups and downs, the global health crisis has highlighted or accelerated many businesses' need to adapt. For others, it has proven the strength of their digital models.
Countering Emerging Threats
This survey provides valuable insights on the state of financial crime in 2020 and highlights the crucial role technology, education and anti-financial crime culture play in building the operational resilience needed to counter emerging threats.
Although the respondents call for a more concerted and innovative regulatory push to curb illicit financial flows, many findings are in line with the current priorities of regulators from across the EMEA region. As organizations continue to grapple with the protracted effects of COVID-19, financial crime will likely be at the top of public and private sector agendas.