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4 reasons it’s getting harder to deal with financial crime

Financial crime has evolved drastically; with the introduction of each new technology, it doesn’t take very long for those with criminal intent to use it to their own advantage. As banks know well, the consequences of letting financial crime go are potentially catastrophic: accidentally taking part in the funding of terrorist activities, losing money to fraud, and being on the receiving end of hefty fines for lack of compliance, to name a few. As the challenges of financial crime become more complex, banks require more sophisticated solutions to overcome them. Let’s explore some of the most pressing reasons that banks are having more difficulty than ever before dealing with financial crime:

1. Evolving forms of fraud

Today, the face of fraud is changing: banks are dealing with fewer counterfeit credit cards, and more cases of online account fraud. Increasingly, banks are faced with threats in the form of malware, identity theft, and hacking vulnerable passwords. Furthermore, today’s fraud tends to target more people but steal less from each person: in 2015, the number of consumers impacted was the highest in six years, but the amount of data stolen per individual was the lowest. The fact that fraud is increasingly composed of many small fraudulent transactions rather than a few big ones means that banks need increasingly sophisticated, granular tools to identify small and varied instances of theft.

2. Growing complexity of illegal transactions

Not only are banks facing external theft and fraud, there are also massive internal risks of bank customers laundering money and directing transfers to terrorist organizations, narcotics dealers, politically-exposed persons, and sanctioned countries. Money laundering techniques are becoming increasingly sophisticated, with one study showing that 50% of money laundering or terrorist funding incidents went undetected by traditional system alerts. But furthermore, rapidly evolving sanction lists with sometimes questionable data quality are a challenge for banks to keep up with. This is a significant source of concern for executives in the financial services industry, with 63% reporting that sanction compliance has consumed more time, money, and personnel in the last three years.

3. Increase in transaction volume

Because mobile banking has become such a convenient, integrated part of customers’ lives, people are using their mobile banking services at unprecedented volumes. In 2015, British customers logged into their online banking accounts 895 million times, and that number is projected to rise to 2.3 billion in 2020. This increased traffic places additional burdens on banks’ on-premises IT infrastructure. And the resulting increase in transaction volume makes it more difficult for banks to screen for criminal transactions. The volume and value of banking transactions are expected to increase by 9% every year until at least 2020. Where banks used to manually process transactions on paper, they have now been forced to automate as many routine processes as possible to accommodate growing digital transaction volumes. Automated processes that are insufficiently sophisticated, and rarely undergo human review, put banks at greater risk of allowing fraudulent activity to slip through the cracks.

4. Risk of false positives

In order to more aggressively stop criminal transactions in their tracks, many banks are shifting from a passive “observe and report” approach to proactively blocking crime before it occurs. However, the risk of this strategy is that it puts banks at a higher risk of “false positives:” accidentally freezing a transaction from a legitimate source. Every time a legitimate transaction triggers an alert and is blocked, banks anger customers and chip away at loyalty. In order to avoid this, banks need to hire more staff to review false alerts and release legitimate transactions before cut-off time. Banks are under pressure to balance customer experience with effective screening, and face challenging tradeoffs.

Rising to the challenge

Today, banks face a myriad of threats coming from every angle. To meet the challenge of transactions from illegal sources, Temenos developed a sanction screening solution, Screen, to identify and prevent illegal transactions.  Screen, built on Microsoft Cloud technology, is a real-time sanction screening engine that offers banks a powerful way to ensure suspicious transactions don’t slip through the cracks. With industry-leading protection that screens against multiple watch lists, adaptive screening to enhance security, and the lowest rated of false positives in the industry, Temenos’ Screen solution is built to rise to the challenges banks are dealing with today. Screen is built on the Microsoft Cloud, enabling greater power, speed, security, and adaptability than possible with any over-burdened on-premises solution.

You already know the difficulty of dealing with financial crime. Learn more about how Temenos’ Screen solution can help today. Try the solution for yourself on the Microsoft AppSource.

Read more on the Microsoft Banking & Capital Markets and Insurance blogs.