A brief understanding and discussion of financial crimes

Economically motivated crimes break the very fabric of business and society. The consequence of these crimes are not just financial losses, but also a significant decline of morale, reputation and stability of nations, organizations, and individuals.

Money laundering extends beyond organised criminal groups, and occurs at various levels, across industries, and for a multitude of motives. What’s more worrying is that they are increasingly aided by technology, which makes detection and prevention of financial crimes one of the greatest challenges of the decade.

What constitutes a financial crime?

Financial crime refers to the process of obtaining money, services or property illegally, and benefiting from the proceeds, directly or indirectly. Money laundering and terrorist financing are key crimes that affect the security, integrity and growth of nations.

Money laundering transforms the proceeds of crime into seemingly legitimate money or other assets. Once funds are successfully diverted by a fraudster, they need to be ‘cleaned’. Networks of accounts, money mules, synthetic identities, and complex corporate structures all ensure transactions are layered to camouflage the illegal source.

Terrorist financing is simply the procurement of funds to facilitate terrorist activity. This could take the form of donations from individuals and groups in support of the cause, revenue generating criminal activities, or the abuse of legitimate economic activities.

Tax fraud arises when information on a tax return is wrongly reported by an individual or business entity with the intention of limiting the amount of tax liability.

Corruption includes all unlawful or improper behaviour that seeks to gain an advantage through illegitimate means. Bribery, fraud, embezzlement, cartels, abuse of power, extortion, and collusion are all forms of corruption.

Identity theft is the deliberate use of someone else’s identity to gain a benefit, financial or otherwise; or act to the victim’s disadvantage.

Market abuse arises when financial market investors have been disadvantaged by those who have used information which is not publicly available (insider dealing), or have have distorted the price-setting mechanism by disseminating false or misleading information (market manipulation).

Cybercrime is any criminal activity that involves a computer and a network, and whose primary impact is financial –  ransomware attacks, email and internet fraud, and identity fraud, attempts to steal financial account, credit card or other payment card information.

What are the tools available to combat such crimes?

Gone are the days when financial crimes were restricted to organised criminal groups such as terrorist factions. Today, these crimes are committed by anyone with an opportunity or motive.

Given the increasing volume of global transactions, Anti Money Laundering (AML) regulations are evolving rapidly. Banks and financial organizations must develop and maintain sustainable AML programs to keep up with the compliance climate. Officials are resorting to technology in order to extensively monitor accounts and transactions. AML efforts include a range of activities such as KYC/ CDD, OFAC and PEP screening, transaction monitoring and alert review, document reviews and evidence analysis, risk identification, and much more.

The War on Financial Crime – A fireside chat with Preet Bharara, former US Attorney, Southern District of New York is an event conducted by Allsec XQ, a thought leadership forum driven by Allsec Technologies. We invite stalwarts and seasoned professionals from the banking and financial industry to take part in the discussion, that will act as a stepping stone towards global collaboration against financial crime. To know more, visit https://www.allsectech.com/allsec-xq/.

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