Building financial crime
resilience today to future-proof
banks for tomorrow
Executive Summary
Gareth Evans
Senior Business Solutions Consultant, Fraud Prevention, BAE Systems
The fast-evolving, sophisticated and increasingly global threat of financial crime is one of banking’s biggest challenges. To be truly future-proof, institutions must move faster than the criminals who seek to attack them.
The financial sector is changing as never before. Open Banking, cryptocurrencies, artificial intelligence (AI), Big Data and cloud technologies are transforming the way people bank. Fintechs and challenger banks are widening the marketplace.
But those same advances bring opportunities for criminals as well – in terms of the types of crime committed, the perpetrators and their means of attack. They also render financial crime harder to identify and defeat.
One thing is clear. The most successful and profitable banks of tomorrow will be those that work hardest on financial crime prevention and defence today. This paper explores some of the ways banking can future-proof itself against the growing financial crime challenge.
The fast-evolving, sophisticated and increasingly global threat of financial crime is one of banking’s biggest challenges. To be truly future-proof, institutions must move faster than the criminals who seek to attack them.
The financial sector is changing as never before. Open Banking, cryptocurrencies, artificial intelligence (AI), Big Data and cloud technologies are transforming the way people bank. Fintechs and challenger banks are widening the marketplace.
But those same advances bring opportunities for criminals as well – in terms of the types of crime committed, the perpetrators and their means of attack. They also render financial crime harder to identify and defeat.
One thing is clear. The most successful and profitable banks of tomorrow will be those that work hardest on financial crime prevention and defence today. This paper explores some of the ways banking can future-proof itself against the growing financial crime challenge.
Gareth Evans
Senior Business Solutions Consultant,
Fraud Prevention,
BAE Systems
Financial crime fighting costs dearly
The full extent of the challenge may be unclear, but that it constitutes a major expense for banks is not. The total annual bill for UK banks for combating cyber crime and online fraud is £6.7 billion, reports the Financial Conduct Authority (FCA).
Banks prevented two-thirds of fraud attempts in 2018 (says UK Finance), but in many cases a lack of support is making the job harder. One police force filed 96 per cent of well-evidenced fraud reports without further investigation, states a recent report from Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services (HMICFRS).
In America financial institutions are spending $25.3 billion to meet their anti-money laundering compliance requirements, states research from LexisNexis.
Financial crime-fighting costs dearly
The full extent of the challenge may be unclear, but that it constitutes a major expense for banks is not. The total annual bill for UK banks for combating cyber crime and online fraud is £6.7 billion, reports the Financial Conduct Authority (FCA).
Banks prevented two-thirds of fraud attempts in 2018 (says UK Finance), but in many cases a lack of support is making the job harder. One police force filed 96 per cent of well-evidenced fraud reports without further investigation, states a recent report from Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services (HMICFRS).
In America financial institutions are spending $25.3 billion to meet their anti-money laundering compliance requirements, states research from LexisNexis.
For larger firms, this –added to Know Your Customer (KYC) and Customer Due Diligence (CDD) – brings the sum spent on meeting the regulatory requirement of fighting financial crime to more than £370m in the UK.
Compliance is costly; as is non-compliance. From 2010 to 2015 banks paid more than £230 billion in fines related to non-compliance, says Accenture. Future-proofing not only means fighting financial crime with real vigour, but also ensuring it is done in a way that is as time- and cost-efficient as possible.
Taking the lead
Those banks seizing the initiative look set to gain competitive advantage. And there are plenty of successful examples. The banks introducing the new ‘confirmation of payee’ service ahead of the 2020 regulatory deadline is just one.
Nordic banks are leading the way in the use of national digital identity schemes to fight fraud. Sweden's BankID system has 75 per cent eligible population adoption. National Australia Bank meanwhile is developing biometric technology to protect customers from financial crime, working with Microsoft on biometric ATMs.
In the UK, £24.7m of fraud has been prevented, says UK Finance, thanks to the Banking Protocol, a joint initiative between police and banks, aimed at identifying and protecting potential fraud victims.
Explore how banks can future-proof themselves against financial crime.
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A changing
landscape:
Open Banking
A changing
landscape:
Open Banking
Future-proofing payments: the cryptocurrency criminal
Future-proofing payments: the cryptocurrency criminal
Money laundering and cryptocurrency: shifting liability
Money laundering and cryptocurrency: shifting liability
Tomorrow's
technology:
the AI revolution
Tomorrow's
technology:
the AI revolution
Challenges
for
challengers
Challenges
for
challengers
Conclusion: Future-proofing wins customers and keeps them
Conclusion: Future-proofing wins customers and keeps them
A changing
landscape:
Open Banking
A changing
landscape:
Open Banking
Future-proofing payments: the cryptocurrency criminal
Future-proofing payments: the cryptocurrency criminal
Money laundering and cryptocurrency: shifting liability
Money laundering and cryptocurrency: shifting liability
Tomorrow's
technology:
the AI revolution
Tomorrow's
technology:
the AI revolution
Challenges
for
challengers
Challenges
for
challengers
Conclusion: Future-proofing wins customers and keeps them