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The Old and the New: Crime Fighting Lessons for Banking

Senior Business Solutions Consultant, Fraud Prevention, BAE Systems Read time: 4 mins
Startups and centuries-old financial institutions: when it comes to fighting crime, both sides gain from working together, says Gareth Evans.
The Old and the New: Crime Fighting Lessons for BankingThe banking marketplace is a busy one. New entrants are shaking up the industry, challenging larger institutions for their valuable customer base. There are important lessons to be learnt from both sides in creating future-proof financial crime defences.

Smaller fintechs and newer banks are able to offer a fast and frictionless experience that is highly appealing to the modern consumer, used to doing things fast and changing providers at the click of a button. But this can come at the price of proper customer onboarding, causing security problems later. Data collection may be time-consuming for banks, but it must be done with care given its sensitivity and potential value to criminals.

Attractive interest rates and hassle-free customer verification are appealing at first, but the attraction quickly pales if fraud is a byproduct. And what will happen if regulations change further down the line? Start-ups and challenger banks could then find themselves saddled with costly and distracting due-diligence obligations.

Larger banks, on the other hand, are in a much better position to hire the top talent in order to future-proof their defences. Some are already going so far as to assign risk scores to potential customers according to their estimated likelihood of committing financial crimes.
 
 

There is a balance to be struck

There is, of course, a balance to be struck. Navigating this difficult territory will be key to winning competitive advantage. Security must not be neglected – indeed it must be ongoing and constantly evolving. But banks also need to ensure they don’t go down the route of treating all potential customers as potential criminals.

Challenger banks and fintechs are examples of how younger infrastructure generally means greater agility. Most of them have digital customer-verification built in from the start, which means they are often better placed to manage threats.

Conversely, as challengers grow and find themselves increasingly bound by regulation, they run the risk of becoming less attractive to their time-pressed customers. Staying on top of regulation will help maximise advantage as well as assist financial crime prevention. Here the onboarding processes of the larger organisations offer valuable examples.

Clever criminals are using a myriad of methods, including trusts (where confidentiality agreements make it harder to identify the owner of money) and combining legitimate business with illegal business to ‘hide the noise’. These clever fixes make an industry-wide collaboration vital, with best practice shared from all sectors, to ensure the right level of regulation in the face of an increasing threat.

This means not only working to disrupt the technology that enables financial crime today, but also on predicting how the threat will emerge – and developing tools and legislation accordingly.

As fraudsters spend more brain power and illegal money on getting around regulations and recruiting insider help, the industry must collaborate on its fightback.
 
 

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Future-Proof Banking

Building financial crime resilience today to future-proof banks for tomorrow

The world of banking is transforming at enormous speed. Criminals are easily keeping pace. The most successful and profitable banks of tomorrow will be those that work hardest on financial crime prevention and defence today.
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Gareth Evans Senior Business Solutions Consultant, Fraud Prevention, BAE Systems 1 August 2019