The last six months have been unusual. In March, as the spread of coronavirus proliferated in Europe, financial institutions across the continent switched the lights off and mobilised tens of thousands of staff to work from home. Suddenly, the home working trend – which some organisations had been gingerly embracing for years – had become standard and IT professionals had to rush to gear up networks for our ‘new normal.
Overnight, investment programmes got put on ice, as decision making groups faltered, delivery slowed and the focus of businesses switched to minimising the financial impact of the coronavirus crisis. Additionally, new financial crime investigations dried up, as coronavirus made it difficult to mobilise teams to investigate issues on the ground. The prosecutions that have made headlines are the conclusions of long running investigations and cases that have been closed. Inadvertently, this created a perfect storm for cyber criminality – busy as bees, perpetrators have been looking for ways to profit from the crisis, leaving organisations – and individuals – vulnerable.
So, against this bleak backdrop, what are our five predictions for the second half of 2020? What do we think will be a trend or big news?
Shoring up risk management: unfortunately for financial crime compliance professionals, the current crisis has not just caused criminals to deploy their usual stings; new scams and new ways to profiteer are emerging and organisations need to bolster risk management procedures to deal with them. As new compliance programmes were put on the back burner at the start of lockdown, in H2 there needs to be renewed vigour – we think regulatory change will start to gain traction to deal with the new wave of threats.
The rise of coronavirus financial crime: the increase in coronavirus based phishing scams has been well documented. Fake emails from trusted organisations – like the World Health Organisation or charities – have been doing the rounds, tricking unsuspecting victims into parting with cash. And hacking has soared in lockdown, as cyber criminals seek to exploit any vulnerabilities in hastily arranged home working situations – attacks hitting home workers increased from 12% of malicious email traffic before lockdown in March to more than 60% six weeks later, according to cybersecurity provider Darktrace.
Money laundering in the new norm: through lockdown, access to drugs and criminal scams was significantly reduced as there were physically fewer people on the streets. This pent up demand means a hike in some money laundering activity – the use of money mules, for example. People are recruited through Instagram or Snapchat and paid to share their bank details. Fraudsters then deposit large sums of cash and instruct the victim to transfer to another account. With the potential for unemployment to increase, more people will be susceptible. But there are good things too – as cash-based transactions decline in countries hit hard by coronavirus, the opportunities for cash based money laundering shrink. So financial crime compliance professionals need to be on the front foot and aware of how criminal gangs are pivoting to operate in the new normal.
New AML and financial crime technologies: new technologies will be explored that can help financial institutions in the City – already feeling the squeeze from Covid-19 – reduce costs and increase the detection of criminal activity. Artificial Intelligence (AI) and real-time transactional data analysis, allow payments to be investigated in-flight the moment a transaction occurs, seeking unusual patterns and providing instant analysis which is something the older manual alert systems cannot achieve.
Impact of ‘no deal’ on financial crime: to cap the year off – it’s the end of the EU withdrawal transition period on 31st December – financial institutions across the City will be following announcements closely to see what impact a ‘no deal’ Brexit will have on financial crime prevention.
Unfortunately, criminals see any disruption as an opportunity to exploit systemic weaknesses and severe disruption – such as that encountered during the current crisis – creates further opportunities for them. So now, more than ever, organisations need to have robust systems, processes and controls in place to detect and prevent criminal activity. Keep your eyes open.
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