Covid and Crime: Upping the Fight against Global Financial Crime in the Time of Corona – PaymentsJournal

Crisis and the uncertainty andpanic that accompany it often opens doors to criminality, inviting bad actorsto prey upon our fears and anxieties. The global pandemic has unfortunatelyprovided such an opportunity, unprecedented in modern times: allowing hackersand scammers to take advantage of distracted governments and law enforcementagencies and of the disruption to increasingly anxious citizens routines tocarry out financial theft and money-laundering schemes.

Interpol has even issued an official warning over fraud schemes linked to COVID-19, detailing some 30 fraud types ranging from phishing attempts to phony sales calls. To make matters worse, our disrupted routines pose a serious challenge to fraud detection tools utilized by banks that analyze patterns in payment and money movement, making it much harder to detect truly suspicious behavior within a sea of false positives.

Financial crime was already amajor threat to the worlds economy long before the current health crisis. TheUN estimates that $1.7 trillion is laundered globally every year. Despite thevast sums that banks and financial authorities spend on tracking and combatingmoney laundering, only 1% of laundered funds are actually identified andseized.

Financial experts and regulatorsagree that one of the main reasons why enormous sums of money are being stolenand laundered each year is the lack of information sharing amongst the relevantbodies, leaving each institution with blind spots. And with fraudstersemboldened by the current crisis, the need for global inter-bank cooperation tothwart such widespread financial crime is greater than ever.

However, as great as the need is for inter-bank cooperation, banks in different countries and under different jurisdictions cannot collaborate effectively if they lack the ability to exchange data. Tightening data privacy regulations like the EUs General Data Protection Regulation (GDPR) and existing financial industry regulations on sharing pre-suspicious or suspicious information have obstructed banks efforts to run collaborative operations and leverage collective intelligence. Indeed, consumers, enterprises and governments justifiably fear the consequences of sharing individuals account and transaction data, regardless of the legitimacy of banks motivations.

The result: In the face of globalnetworks of financial criminals and money launderers, financial institutionsare effectively hamstrung, left to wage their fight on their own wheninformation sharing could provide them a true upper hand.

Fuelled by recent advances inPrivacy-Enhancing Technologies (PETs), financial crime experts and datascientists are leading groundbreakingresearch to devise solutions that can enable vital collaboration in the fightagainst financial crime, while simultaneously adhering to growing data privacyregulations. Homomorphic Encryption is one of these novel PETs, enablingorganizations to collaborate on and analyze data while it remains encrypted and thus protected from third-partyaccess that regulators and citizens alike so fear.

These innovative productsdesigned to help banks and financial authorities share data securely andefficiently are becoming market-ready. So, for example, to prevent fraudulentpayments, banks can deploy encrypted queries against each others databases,asking questions about suspicious accounts and transactions without everrevealing the contents of these queries as they remain encrypted throughout theinvestigative process. The outcome of these queries is actionable insightsthat will enable banks to weed out falsepositives and to focus their efforts on highly suspicious actors, increasingthe effectiveness of their investigations.

While manual information-sharingprocesses do currently exist such as the one authorized under section 314(b) of the USA Patriot Act,collaborative solutions based on PETs allow for more efficient, large-scale,automated information exchange, enabling effective, joint investigations basedon bilateral or multilateral collaborations. Such solutions also foster theestablishment of consortiums between banks and law enforcement such as the UKsCyber Defence Consortium (CDA), an early adopter of collaborative investigationmethods based on PETs.

Effective, regulation-compliant solutions for fighting widespread internationalfinancial crime are available now, and must be deployed in order to fight thisunfortunate side effect of the current pandemic. In todays volatile economicclimate, banks have an essential role to play in stemming the flow of this growing globalfinancial scourge and preventing fraud and financial crime from furtherdestabilizing global markets.

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Article Name

Covid and Crime: Upping the Fight against Global Financial Crime in the Time of Corona

Description

Fuelled by recent advances in Privacy-Enhancing Technologies (PETs), financial crime experts and data scientists are leading groundbreaking research to devise solutions that can enable vital collaboration in the fight against financial crime, while simultaneously adhering to growing data privacy regulations.

Author

Dr. Alon Kaufman

Publisher Name

PamentsJournal

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Covid and Crime: Upping the Fight against Global Financial Crime in the Time of Corona - PaymentsJournal