Financial crime has always been a serious issue, but there’s been an uptick in the movements of fraudsters and terrorist financiers in the wake of the COVID-19 pandemic. Sadly, many people who can serve as part of the first line of defense against money laundering, embezzlement, forgery, terrorism financing, and pump-and-dump schemes—namely, staff and managers at financial institutions—are often not up to the times in their understanding of financial crime.
Many bank personnel still believe in outdated notions of how criminals will present themselves or what types of transactions can be flagged as criminal. Others may be skeptical about how big the problem actually is and just how productive it would be to adopt extensive countermeasures. If you are a decision-maker in a financial institution, these are the people that you should reach out to. Empower your banking staff and management team to be effective defenders against financial crime, and dispel these four myths that they may currently believe:
Money Launderers Only Target Large Institutions
One of the most prevailing myths about financial crime is that it is only a big problem for big-name institutions. After all, most crimes that make it to the news involve large, traditional names in the financial sector. For that reason, your staff might assume that financial criminals do not often target small rural or mid-sized banks—“small fry” financial institutions.
But the opposite couldn’t be truer. In the mind of a financial criminal, any type of institution is fair game. Big banks may appeal to some criminal networks, but others make it a point to target smaller institutions because the latter tend to have their guard down, possess financial crime compliance technology that’s easy to get around, or both.
This proves the point that any type of financial institution should be sufficiently protected with modern anti money laundering (AML) software and robust AML policies. Knowing that criminals could come knocking anytime, you and your staff should take the right precautions.
Money Laundering Crimes Only Happen with Huge Amounts of Money
A second myth that many believe is that most money laundering crimes involve obscene amounts of cash. This is usually the case when money laundering, heists, and other forms of financial crime are portrayed in movies and TV shows. Too often, people forget that these amounts are written in to heighten the stakes in a work of fiction—and that real-life scenarios are often a lot more mundane.
In truth, money laundering often involves smaller transactions, precisely because these transactions are not conspicuous and not as easy to trace. Bank staff may have their eyes trained only on big transactions, not knowing that seemingly unremarkable ones are part of a money laundering operation.
Thus, it’s imperative that staff and managers dispel this notion and adopt an AML approach that takes conspicuous patterns into account. Pattern-based analysis, as opposed to analyzing piecemeal transactions, will be a much better defense against money laundering.
It Will Be Easy to Spot Suspicious Customer Behavior
Similar to the point above, too many bank employees think that it’s possible to sniff out criminals by their appearance or behavior. On the contrary, the best criminals have no resemblance to the caricatures people often encounter in fiction. Today’s criminals have gotten very good at mimicking ordinary banking customers with legitimate business. In other words, it is now much harder to spot the wolves among the sheep.
Again, this is where a pattern-based approach to AML must come into play. Your financial crime compliance team must know how to use artificial intelligence- and machine learning-poweredAML technologies to their advantage and to pinpoint webs of suspicious customer behavior. Money laundering and other forms of financial crime may not be obvious from individual transactions, but taken together, these may reveal suspicious patterns like a group of transfers made with identical IP addresses or a sudden influx of foreign customers from a single locality.
Fighting Financial Crime Will Become More Difficult and Expensive Over Time
Lastly, your banking staff may have a pessimistic view on the fight against financial crime due to the myth that’s inevitable and insurmountable. Some may acknowledge that criminals have gotten better at their dark art, but that it’s impractical for the bank to take on a more aggressive stance.
But while it’s true, indeed, that criminals have gotten wiser about their modi operandi, banks are actually in a good position to level up their anti-financial crime programs. AML technologies that involve advanced features like artificial intelligence, machine learning, and graph analytics are now more accessible and much easier to use than before.
Regulators like the Financial Crimes Enforcement Network (FinCEN) have also made it a point to focus on supporting and coordinating with constituents, knowing that times are dire for financial institutions. You and your team can do away with the myth that you stand alone in an unwinnable fight—because the odds will be in your favor if you take firm action against criminals.
Takeaway: Separating the Fact from the Fiction in Your Fight Against Financial Crime
Any organization that wants to protect its assets and its customers from the threat of financial crime must know exactly what it’s up against. That’s why it’s important to separate fact from fiction. It’s only with a clear-eyed view on how financial crime can happen, as well who the perpetrators might be, that you and your team will be able to defend your bank to the very best of your abilities.