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INSIGHT: Taking a proactive approach to tackling financial crime; Charmian Simmons on following the money, implementing a risk-based approach and AML/Fraud fusion

BAE Systems Digital Intelligence’s FinCrime and Compliance expert, Charmian Simmons has warned that a lot of white collar FinCrime is “flying under the radar”.

Speaking recently to AMLi Publisher Stephen Rae at the ‘Keeping Up with White-Collar FinCrime’ summit, and as part of the AMLi Podcast, Charmian revealed there has been a “huge explosion” in fraud schemes linked to the COVID-19 pandemic, and as such, many white-collar crimes are often rooted in fraud first before they become a money laundering problem.

This issue of “following the money” from white collar crime has become a “bigger issue to tackle” for AML Compliance teams, with white collar crime now receiving more attention across the world.

“We’ve also seen a large explosion through different scams and ponzi schemes, which have arisen and flourished in the last few years,” said Charmian. She adds “white-collar crimes are often more difficult to detect than other types of crimes, in part because losses may not be immediately apparent to the victims, and because they often involve a level of sophistication and cover-up. This makes it harder to track and then harder to the follow the money. Many white-collar crimes also often involve co-conspirators which are skilled in other aspects of criminal activity and that adds to the cover-up!”

The environment where this flourishes – corporate practice – and current corporate policies make white collar crime “much tougher to identify,” added Charmian, who stressed: “It’s much tougher to apprehend and prosecute, and therefore it’s much harder to punish them for those crimes.”

Charmian warned that FinCrime professionals need to be savvy in their processes and use of technology to identify hidden illicit funds as methods used by criminals to launder funds are becoming “more cross-border in nature” in recent years.

Shorter banking time-frames and a move to digital banking means traditional banking is getting easier and quicker, something criminals seek to exploit.

To help combat white collar crime, the FinCrime expert advised that we have to “continue to invest in good frameworks, technology and processes that look more towards the future and deal with emerging risk factors.”

“We have to be able to scale and identify new patterns in the data that we’ve already got on the transactional and customer side, and utilise technology, such as AI and machine learning, to help achieve this more effectively” Charmian mused.

When asked about the benefits of information sharing, Charmian stressed that “we’re at a junction where information intelligence sharing is… going to have to become more of a norm.”

This is simply because “institutions have abundant amounts of data that they may not be able to properly interpret or collaborate with, and the volume of transactions that are being passed around the world coupled with the changes in payment models and payment methods right now means this data continues to grow and contribute to blurring the proceeds of crime,” according to Charmian.

“Information sharing has the capability to “accelerate” and “reveal” what makes up white collar crime areas in ways not easily visible to us today” said Charmian.

Speaking about fraud and AML fusion, Charmian revealed teams or functions within many institutions are currently “very siloed.”

Criminals don’t work in silos, yet many fraud and compliance functions do, although fraud and money laundering are intricately connected, both in terms of criminal activity and regulatory requirements. “Fusion allows each function to operate independently yet work off of and enrich information and workflows which benefit both. Ultimately you want everybody using the same platform, same core data and sharing information… and end up seeing more holistic results based on their speciality of fraud or AML,” she added.

However, this is a “long term vision” according to Charmian, who advised financial institutions looking to start collaborating can begin by “having conversations and communicating the findings that you have.”

“By creating a feedback loop, you can start to see connections or patterns and tie aspects of suspicion together,” she said.

She believes it’s imperative to apply a “risk management approach” to fighting financial crime, adding that: “You can’t boil the ocean.”

Banks must have a good risk-based approach to “understand what they’re going to tackle, how much they’re going to tackle, what’s their capacity and how much it’s going to change their world and environment, all while remaining regulatory compliant” said Charmian.

However, she believed we need to be more proactive in our approach to navigating emerging financial risk, and stressed: “We’re reactive, and always looking back at what’s happened. It’s time to be more proactive in how we approach financial crime”.

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