Top Financial Crime Trends You Should See for 2024

As financial crime continues to evolve, staying ahead of emerging trends is crucial for financial institutions. In 2024, the landscape of financial crime is marked by increasing sophistication and complexity, necessitating a proactive and informed approach from all levels of an organization. 

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In this blog, we—Anna, Baptiste, Luke, and Bill—discuss key trends shaping financial crime, offering insights and strategies for institutions to navigate these challenges. We share our valuable perspectives and actionable advice. Let's dive into the critical financial crime trends to watch in 2024.

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Financial Crime Trend #1: Board of Directors Evolving Role

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Insights from Anna Stylianou, Owner, Consultant, Trainor - AML Cube

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In 2024, it's more important than ever for financial institutions' boards to stay on top of compliance requirements, staffing strategies, and risk management tactics to build strong financial crime compliance programs. With my extensive experience in traditional banks and fintech companies, I have witnessed how overwhelming the Board's responsibilities can be. Along with profit-making and strategic decisions, financial planning, performance and other duties, they also need to ensure compliance of the entity including:

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• Keeping up with AML regulations.
• Staying updated on evolving threats, like identity verification challenges.
• Understanding threats targeting both financial institutions and non-regulated entities.
• Using the right tools and conducting thorough risk assessments.

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When fraud happens, the company faces financial and reputational hits. That's why the board, senior management, and employees must be aware of the latest fraud methods and implement effective principles.

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The Importance of Board Awareness and Action

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Insights from Luke Raven, Founder & Principal Consultant - Raven AML

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The board's awareness directly impacts staffing, program development, resourcing, and budgeting. Without a clear understanding of the requirements, an organization will struggle to implement effective risk and compliance programs.The board of directors' role is paramount, as global regulatory actions and enforcement highlight it.The board needs to navigate complexities while ensuring AML communicates key messages and earns their trust. 

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Tracking Fraudster Sophistication

As fraudsters become more sophisticated, financial institutions must keep up with their level of complexity. The growing use of advanced technologies like LLMs and ChatGPT in fraudulent activities underscores the importance of staying ahead of these developments and responding effectively. 

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Financial Crime Trend #2: The Impact of Advanced Technologies

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Insights from Baptiste Forestier, Head of Compliance, Hero

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The advent of advanced technologies like LLMs and ChatGPT has opened up new possibilities for cybercriminals. Criminals using open-source LLMs, such as Meta Llama and WormGPT, face challenges, including using tools for spear phishing and business email compromise (BEC) attacks. These tools can tailor messages to specific targets and create undetectable malware.

The FBI Internet Crime Complaint Center (IC3) reported $2.9 billion lost to such attacks in the U.S. last year, which really underscores the significant impact. Traditionally, fraudsters and hackers had distinct roles, but LLMs now equip criminals with the tools and knowledge to operate more effectively.

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To mitigate these new threats, I suggest:

• Focusing on employee training to recognize sophisticated attacks
• Defining and enforcing strict procedures for managing sensitive email requests
• Using tools to analyze incoming emails for context, online reputation, and contacts
• Implementing advanced antivirus software that goes beyond signature-based detection

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Addressing Synthetic Identity Fraud

Let’s discuss how generative AI creates super-realistic fake documents, which is a big risk for fraudulent account openings. Criminals can now use AI tools to create incredibly realistic fake IDs, signatures, and photos, making it really hard for traditional verification methods to detect fraud.

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To combat this, I recommend:

• Implementing video verification with liveness detection, where users are asked to look in a certain direction or say a sentence
• Integrating solutions that detect generative pictures, as many compliance providers are already doing

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These measures can help financial institutions stay ahead of fraudsters and protect against synthetic identity fraud.

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Financial Crime Trend #3: Unify Fraud and AML Compliance?

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Insights from Luke Raven, Founder & Principal Consultant - Raven AML

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Many experts have advocated for unifying fraud and AML compliance teams under a single banner of FRAML for various reasons. However, Luke has a different perspective.

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FRAML: Should They Really Be Together?

I want to share my thoughts on the hot question of whether to unify fraud and AML compliance teams. While fraud and AML are related, I believe combining them operationally is a bad idea. The investigation of fraud and AML is very different, and mixing the two can lead to inefficiencies.

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Here's my take:

• Fraud and AML require distinct expertise.
• Overburdening AML teams with extra responsibilities is counterproductive.
• Silos, though often criticized, are necessary to maintain order and efficiency.

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It is important to let experts specialize and collaborate effectively rather than merge their roles.

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The Importance of Specialization

Having a unified data layer to see suspicious activity across teams is beneficial, but expecting one person to handle the entire program is unrealistic. Here's what I advocate for:

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• Specializing teams in their respective areas.
• Using a unified data layer for a cohesive strategy.
• Ensuring effective communication and collaboration between teams.

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Striking the Right Balance 

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Insights from Anna Stylianou, Owner, Consultant, Trainor - AML Cube

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I offer a balanced perspective, acknowledging the risks and potential benefits of combining fraud and AML departments. There are significant challenges in combining the two, but I believe it is possible with good coordination and communication. Here's what I emphasize:

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• Specialization is crucial; it is difficult to be an expert in both AML and fraud.
• Silos are necessary but shouldn't hinder communication and information sharing.
• Coordination and communication between departments are essential for the company's and customers' best interests.

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Financial Crime Trend #4: The Role of Suspicious Activity Reports (SARs)

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Insights from Bill Callahan, Principal Owner - WJC3 Solutions

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Let me share my unique perspective on how federal and government entities absorb SARs, illuminating what happens after an organization files a suspicious report.

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The Black Hole of SARs

This is an important point about the lack of visibility into what happens after submitting a Suspicious Activity Report (SAR). Many in risk and compliance feel like they're sending reports into a black hole with little feedback or follow-up. This really highlights the need for better communication and transparency in the process. 

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Behind the Curtain of SAR Processing

I often hear, "We put all this effort in, and we hear nothing." This lack of feedback is due to the need for a response mechanism. However, SARs are read at different levels and can lead to significant investigations. SAR Review teams analyze these reports before they reach law enforcement, identifying well-written ones with actionable information. 

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The Journey of a SAR

I remember a memorable investigation initiated by a SAR from a Miami bank. The SAR flagged large wire transfers from a Queens jewelry shop to a yacht maker. This well-written report led to the discovery of a large Mexican drug organization, intercepting significant money and seizing a substantial drug shipment. 

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Tips for Writing Effective SARs

The importance of including detailed information in SARs. Here’s my advice:

• Clearly state what is suspicious and why.
• Provide a broad view of the customer base and geographical context.
• Avoid making assumptions about criminality and focus on observed suspicious activity.

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These details help investigators follow leads and uncover larger criminal activities.

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The Importance of SARs in Combating Crime

SARs play a crucial role in flagging suspicious activity tied to nefarious, often international, crime activities. Well-written SARs are essential in enabling federal entities to take action and bring investigations full circle, underscoring their importance in the fight against financial crime.

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Stay Ahead of Financial Crime Trends!

The discussion on unifying fraud and AML compliance teams and the role of SARs highlights the need for specialization, communication, and detailed reporting. Financial institutions must balance expertise and collaboration to build robust financial crime compliance programs.

Stay informed and proactive in combating financial crime. Join us for an in-depth session on 2024 financial crime trends with LinkedIn's top voices in risk and compliance. Watch the session on-demand and gain valuable insights and strategies.

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