By Andrew Doyle, CEO, AML compliance software, NorthRow
There’s no escaping the fact that incidents of fraud are growing, and at an alarming rate. In fact some of the statistics make for pretty grim reading.
According to a report from the Association of Certified Fraud Examiners, up to five percent of corporate revenue is currently lost to fraud every single year – that translates to $4.7 trillion globally. Kroll’s Fraud and Financial Crime Report suggests that over $800 billion is laundered every year, while the Global Economic Crime Survey reveals that 64 percent of businesses have experienced fraud, corruption or other incidents of financial crime within the last 24 months.
Fraudsters are becoming more sophisticated and can quickly adapt their approaches, so there is a real need for banks and financial institutions to keep up to date with the latest fraud trends in order to stay ahead of them. Let’s take a look.
The rise of AI-facilitated techniques
It will come as little surprise that AI-facilitated fraud techniques are bringing a new front in the battle against fraud, making it progressively easier for criminals to commit fraud. Whether it’s using AI voice generation platforms to create voicemail messages or leveraging deep fake video tech to impersonate a person’s identity, as the tech advances so too do the capabilities of bad actors.
Ongoing impact of global economic downturn
And as the capabilities to commit fraud increase, so too do the circumstances in which fraud occurs because during global macro-economic downturns – like the one we’re facing today – crime, including fraud, tends to rise.
As the country continues to battle the cost of living crisis and rising inflation, in addition to external actors using technology to defraud organisations, we will likely see an increase in incidents of internal fraud within organisations, from employees trying to cope with rising costs, including invoice fraud and forging expenses. We may well also see a rise in fraudulent recruiters looking to scam job seekers out of money.
Businesses, job seekers and consumers need to stay vigilant and be wary of this as we move into 2024.
Fraud defences will get stronger
Thankfully, just as criminals use technology to try to commit fraud, so too do companies continue to develop technology that prevents it. In 2024 we will see the further development of intelligent systems that use AI, machine learning and biometric verification to spot and stop fraud.
For example, machine learning algorithms will better predict potential incidents of money laundering before they occur and automated technology will make due diligence checks more thorough and free from human error. Advances in biometrics, for example finger-vein recognition, will also give us a much better chance of staying ahead of the scammers and the deep fakes.
As methods of money laundering and fraud evolve, so too must the regulation that guides anti money laundering efforts. Consequently we are likely to also see the continuous updating of regulation in 2024 and beyond, requiring firms to devote more time and resources to compliance than ever before.
And with a deepening focus on ESG, businesses will also need to scrutinise the entities and individuals they do business with, more than ever, to ensure there is no indirect involvement in environmental crimes or human rights abuses, let alone money laundering.
To the future
While the acceleration of AI and the global economic climate mean both the capabilities and the circumstances to commit fraud are increasing, the good news is that the tools and the ability with which to combat the fraudsters and bad actors are also evolving and developing just as quickly.
Banks and other financial institutions need to stay up to date with the ever changing regulations around the movement of money and invest in the right technology to make sure they not only stay one step ahead of the scammers in the year ahead, but help win the war on financial crime altogether.