Top 3 Threats Facing the Financial System

Industry Insights from the 2024 Global Financial Crime Report

April 30, 2024 by Verafin

The global financial system is facing prolific and diverse threats from financial crime, driven by illicit fraud and money laundering schemes. In the 2024 Nasdaq Global Financial Crime Report, a survey of 200 industry professionals, along with interviews with senior anti-financial crime executives, highlighted the top three threats facing institutions and how collaboration can help protect the integrity of the financial industry.

Threat #1: Real-Time & Instant Payments

The immediate nature of transactions, combined with a narrow window of opportunity to detect and prevent potentially suspicious activity are making instant payments fraud a significant risk for financial institutions. Bolstered by the complexity of scams like Business Email Compromise, government benefit fraud, elder abuse and social engineering scams targeting consumers, over half of the report’s survey respondents (52%), identified real-time and instant payments as their top financial crime threat.

The true scale of this crime is difficult to determine, but fraud losses are significant. In 2023, it was revealed that fraud scams and bank fraud schemes totalled $485.6B in losses globally. As instant payment rails grow, institutions need to consider how to adopt these emerging payment channels in a manner that effectively combats evolving fraud types while minimizing customer friction.

Threat #2: Money Mules

Money mules can aid criminals in funding heinous crimes such as human trafficking and terrorist financing — all while helping them evade AML/CFT controls and regulatory scrutiny. These mule networks conceal the source of funds, while facilitating the deposit and flow of illicit proceeds around the world. Almost half (47%) of survey respondents identified money mules as a considerable area of risk to the global financial system.

While the scale of funds moved by mules is immeasurable, this illicit activity is a massive part of the world’s $3.1 trillion money laundering problem. Illuminating and uncovering how these illicit funds move is essential to disrupting global criminal networks.

Threat #3: Terrorist Financing

Terrorist financing relies on highly efficient criminal networks that are not constrained by borders or technology, operating in the shadows to conceal the illicit sources of their funding. Tactics like funnel accounts and money mules are favored by terrorist organizations for their ability to conceal the source of their funds. A third (33%) of survey respondents ranked terrorist financing as a significant financial crime threat. Financing is a crucial aspect for terrorists to carry out their heinous actions, including arms trafficking, foreign and domestic terrorism, and domestic violent extremism.

In 2023, $11.5 billion in terrorist financing flowed through the global financial system. Criminals rely on these funds to carry out their illicit activity – disrupting these intricate financial networks is crucial to protecting the global economy.

Responding to Threats Facing the Financial System: Working in Collaboration

The threats facing the financial system are tremendous – fighting these crimes in isolation is almost impossible. When looking to the future, 25% of survey respondents claimed that keeping ahead of financial crime risks and threats was the challenge of greatest concern in their 5-to-10-year outlook. To address these concerns, respondents highlighted the need to pursue collaboration in their financial crime prevention plan.

Innovative technology and collaborative approaches can help institutions work together to better combat evolving financial crime threats, breaking down the silos that allow criminals to thrive. Disrupting prolific criminal networks requires institutions to leverage collaborative approaches – such as consortium analytics and information sharing to combat emerging financial crime threats.

Protecting the global financial system is a responsibility for each institution – learn how Verafin enables information sharing and consortium analytics to help you prevail in this fight.

Verafin is the industry leader in enterprise Financial Crime Management solutions, providing a cloud-based, secure software platform for Fraud Detection and Management, BSA/AML Compliance and Management, High-Risk Customer Management and Information Sharing. Over 3800 banks and credit unions use Verafin to effectively fight financial crime and comply with regulations. Leveraging its unique big data intelligence, visual storytelling and collaborative investigation capabilities, Verafin significantly reduces false positive alerts, delivers context-rich insights and streamlines the daunting BSA/AML compliance processes that financial institutions face today.

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