Criminals have become more tech-savvy – how can banks stop them?

Organised crime poses a significant challenge to financial institutions in the UK (and worldwide), as it can quickly gain influence and threaten the financial system's integrity.

Criminals can easily access financial crime mechanisms such as compromised data found on the dark web or AI tools and deep fakes used to trick and impersonate victims.

So, what can banks and other financial institutions do to minimise organised crime risks?

In this article, Joe Biddle, UK Market Director, shares his experiences on how companies can better protect themselves and their customers. He has worked at all UK credit bureaus, focusing on regulated financial markets.

1. Leverage human knowledge with emerging tech solutions 

It's known now that financial institutions need advanced technology more than ever to combat financial crime effectively. Criminals are already up-to-speed with the latest technology, specifically within generative AI and deepfakes. However, there is often a gap between theory and practice, as banks lag in adopting the most recent technological innovations.

For instance, in the UK, only 1 in 5 financial service companies consistently check whether new customers are subject to sanctions or are Politically Exposed Persons (PEP).

This situation may leave individuals more vulnerable to organised crime groups that are sanctioned by national and international authorities, as well as high-risk politically exposed persons (PEPs) whom criminal organisations can pressure. 

Organised crime typically focuses on specific targets, often high-net-worth individuals or financially struggling organisations that may be more susceptible to co-option or blackmail. The solution is straightforward: implement tools to automate this screening process and ensure it is conducted regularly. 

"Fighting organised crime within the financial realm requires a multifaceted approach that leverages other advanced technologies, too. These include big data and predictive analytics, data encryption, network analysis, geolocation and geofencing, biometric authentication, multi-factor authentication and voice recognition software," says Joe Biddle.   

2. Conduct enhanced due diligence against potential bad actors

When suspicion arises regarding a potential actor, financial institutions must conduct further know-your-customer (KYC) investigations to detect potential criminal activity.

However, this step is often lacking in organisations' KYC, as the process is treated as "one-and-done" and fails to connect different data sources and behaviours to understand customers' risk levels.

A holistic view of the customer requires integrating new sources of information to detect bad actors. Financial institutions should have anti-financial crime experts who can source the correct information, thoroughly analyse and cross reference with additional data sources to determine suspicious client activity, and use AI to help in pattern analysis.

Sophisticated online romance scams known as "pig butchering" rings show what happens when banks and other financial institutions lack information. Even when run primarily from another country, these networks often use the UK as a base, partly due to the country's lax company registration process. The illicit use of specific properties to run these criminal enterprises is often known to UK authorities, but insufficient action is taken to respond. 

"Institutions can protect themselves by, for example, obtaining company data that can help identify whether a business is a shell company. Another element of enhanced due diligence comes into play when a business or individual may succumb to blackmail. Financial institutions can shed light on whether customers are coming under financial difficulty and are, for example, depositing far more money than their estimated earnings." 

3. Improve industry collaboration

The lack of cooperation between financial institutions is a huge hindrance to fighting organised crime.

Ideally, financial institutions should come together to share best practices, allow secure whistleblowing channels, or share intelligence that individual institutions can't piece together on their own.

That could include information that can help detect modus operandi patterns by organised groups or cross-referencing data with databases and blacklists to uncover known criminal actors.

Although information sharing is often seen as impossible to execute because of stringent data protection and bank secrecy laws, it is actually feasible – a great example is the UK insurance industry. 

"Over the past few years, the UK insurance industry has become far more collaborative regarding data sharing and fraud prevention. If a firm places a known fraudster on the industry-wide Insurance Fraud Register (IFR), they're automatically blacklisted by 80% of the insurance market.” 

Banks and institutions can start by getting their own data organised. Often, internal information is held in various disconnected legacy systems. Moving to an all-in-one banking platform provider and initiating a data transition can empower banks to better analyse their data internally and jointly with other institutions. 

In conclusion

Whether it's organised crime, romance scams, or individual scammers, we have an impressive array of resources at our disposal to thwart them. But we need to sense the urgency and put them into action.