COVID-related financial crime nears two million global cases, but AI could help
As the pandemic first spread across the globe, it left behind a trail of financial trauma, enticing financial and cyber criminals to crawl out of the woodwork to capitalize on the damage.
According to financial insight provider Refinitiv, the number of global cases of financial crime have risen to 1,880,591 as of the end of April 2020, with the daily increase rate appearing to peak in mid-April, nearing 100,000 new cases a day. However, this seems to have lowered to 71,042 new cases a day at the end of April.
The types and severity of financial crime following the pandemic also vary greatly:
- Supply chain fraud: There has been a rise in the sale of fake protective equipment such as sub-standard hand sanitizers, and many fraudsters simply take the money and never deliver the product. One European company reportedly transferred €6.6 million to a supplier for PPE and allegedly never received the goods;
- Phishing scams: The number of criminals trying to steal personal and intellectual property information has risen dramatically, often via phishing emails claiming to be from organizations responsible for providing information relating to the virus;
- Regulatory risk: As new legislation is implemented to tackle the effects of the pandemic, financial institutions are moving more operations online and while this could be an opportunity to explore digitalization, secure solutions must be adopted to avoid cyber security threats;
- Corruption concerns: The UN Office on Drugs and Crime has found that between 10-25% of the money spent globally on procurement of medicines and supplies is lost to corruption.
With these varieties of financial crime, it is perhaps no surprise that many organisations are looking to mitigate risk with new solutions. Enter artificial intelligence (AI).
Amber Sutherland (pictured above), senior vice president, EMEA sales at Silent Eight, explained: “Financial Institutions are struggling to maintain their old processes from scattered remote locations while facing a surge in suspicious activity. And the criminals aren’t waiting for the banks to catch up – they’re busy taking advantage of the chaos and slipping their money through unnoticed.”
A certain proportion of banks have implemented machine learning and other high-tech solutions into their processes although this still isn’t widespread for all financial institutions, many of whom have been able to mitigate their regulatory risk with an emphasis on manpower.
Sutherland continued: “One option for financial institutions is to make use of existing resources by supporting analysts better, which is where AI can help. This would allow analysts to focus on critical aspects of the compliance function, augmenting human judgment with sophisticated self-documenting processes.
“An AI-based know-your-customer (KYC) solution can quickly review account information against the parameters that indicate a likely match. Embedded algorithms then take it a step further, looking for deliberate or incidental variations in relevant fields that might otherwise throw off the analysis. The staff is then presented with a solution (true match, false positive, or escalate).
“With this all being taken care of, the analyst team is free to focus on either checking the solved alert or moving to more complex financial crime matters. The AI also learns from the actions taken by the analyst, adjusting its parameters to reflect the analyst’s final determination.”
However, many organisations remain sceptical on the logistics of implementing the solution, predominantly concerned about having to wait months before it is operational, and the risk of being forced into a years-long contract extending past the end of the crisis.
“From our perspective,” she added, “automotive and equipment finance companies are getting hit hard from both ends. On one hand, their banks are struggling with liquidity and managing new account openings, making them less responsive and less supportive. And, on the other hand, some of their existing customers are struggling to make their payments. Challenging times like these present an opportunity to enable companies to reassess their processes and current way of doing business. During these times, they can make the decisions needed to create efficiencies and create future-proofing. And one of the most effective ways to do this, in our experience, is by offloading labour-intensive tasks to AI-based technology.”
Prior to joining Silent Eight, Sutherland held roles at HSBC Bank Canada where she was responsible for mitigating financial crim risk and acquiring new business. She left HSBC in 2018 to help Global Relay develop and execute their go-to-market strategy as regional business development manager, EMEA.
According to Sutherland, Silent Eight have announced the provision of its cloud-based name and entity alert adjudication solution on an on-demand basis. Capable of deploying the solution in as little as two weeks, it does not require any annual commitment, and clients only pay for the fully resolved alerts.
Founded in 2013 by a group of programmers and due diligence experts, Silent Eight is a regulatory technology firm that offers an AI-based solution that fully optimizes the most time-consuming parts of a bank’s due diligence process.