Regulators expect firms to detect and report suspicious conduct relating to COVID-19 relief program frauds and other new dangers. COVID-19 has transformed the profile of potential fraud and financial crime, with a significant increase in medical scams, impostor scams, money mules, unemployment insurance, and cybercrime.
Fremont, CA: The upheavals that impacted all businesses in 2020 will permanently alter the financial services industry. With such developments come regulatory and public policy difficulties and concerns, which will begin to shape the future in 2021, affecting the direction of action.
Here are some top regulatory pressures of the fraud and financial crime field:
Alignment of Risks with Capabilities
Regulatory expectations are rising to align program design with the real-world risks posed by consumers, goods, and locations. In line with the need for higher reporting quality, authorities are requesting evidence of how KYC programs improve detective capabilities and risk assessments and vice versa.
Deployment of Advanced Technology
Financial services firms continue experimenting with various automation and artificial intelligence levels, but legacy data and system issues cause lengthy and restrictive implementation timetables. Data, governance, validation, and reporting challenges make it difficult for many companies to transition these capabilities from the lab to production. Furthermore, the quicker implementation of the proposed central bank digital currencies will necessitate a redesign of existing technological capabilities and operational processes.
Continued Emphasis on Sanctions
Economic sanctions remain a significant emphasis as the number and complexity of sanctions regimes increase around the globe. Many businesses struggle to align sanctions detection and alert management skills with the demand for speedier or immediate payments and digital currencies. Legacy technology solutions provide many false positives and necessitate extensive manual involvement, affecting processing times.
Enterprise-Wide Focus on Fraud and Financial Crime
Regulators want businesses to measure and respond to fraud and financial crime risks across all business lines uniformly and integrated. Firms are required to collaborate across functional silos in cyber and IT safety, product-focused fraud, economic crime teams, corporate AML leadership, and regulatory reporting. Many businesses may have to redesign their operating and reporting structures in areas that were previously separate functions.
Response to Cybercrime and Ransomware
Account takeover, ID theft, bot attacks, and synthetic ID fraud are key fraud concerns caused by cybercrime and holes in cybersecurity measures. Furthermore, recent regulatory guidance, including red flag indicators, has heightened expectations that firms will file suspicious behavior reports for cybercrime and ransomware payments made with crypto assets that may pass via the firm's custodial or accounting processes.
