Banks fear an increase in financial crime

Survey outlines banks' fraud and AML concerns

NEW YORK - Banks fear financial crime and regulatory scrutiny will increase as a result of new mobile banking payment methods, pre-paid cards and 'virtual world' online transactions, finds a survey by risk software company Fortent. The survey questioned senior anti-money laundering (AML) compliance officers in North America and Europe.

Cited by 52% of respondents, identity theft represents the greatest emerging financial crime risk. Identity fraud has risen dramatically over the past few years. The Fortent survey demonstrates widespread concern that fraudsters will pounce on fledgling banking technologies as the new vehicles for financial crime.

The second-greatest concern (44%) was 'virtual worlds', which exist for online entertainment but involve transfers of real money. Currently a regulatory grey area, it is subject to growing concerns over money laundering, fraud and terrorist financing possibilities (see OpRisk & Compliance, August 2008).

Employee fraud was third (32%), demonstrating the heightened risk of internal fraud as employees come under increased pressure from tense market conditions and increased staff turnover and redundancies. (The top 10 risks for 2009 will be covered in more detail in the next issue of OpRisk & Compliance).

"Financial institutions are finalising their budgets now for next year, and the question on everyone's minds is how they are going to tackle these new threats when staff, technology and training resources are already stretched," says Ed Baum, Fortent's chief marketing officer.

Stored value cards (28%) were the fourth largest concern, reflecting the risks of implementing new technology for retail banking customers. Compliance officers considered retail banking the top area for money-laundering risk, with 77%.

"The expansion of payment platforms, while good for business, poses new risks on both the regulatory and security fronts," says Baum. "Our survey reveals that financial institutions are acutely aware that they must respond to these emerging threats."