Financial crime remains a massive global problem in 2021, affecting almost every industry. The term ‘financial crime’ covers a wide spectrum of issues, such as money laundering, cyber crime, theft, bribery, and trafficking of illegal products. Billions are lost to these secretive crimes each year.
Although constant research, innovation and development is taking place to find ways to detect and prevent financial crime, criminals are innovating just as quickly. Due to the huge sums of money to be gained, scammers are highly motivated to continuously seek out new ways to abuse the internet to move money and cover their tracks. This means companies must stay on their toes, and remain agile enough to identify and respond to new threats as they emerge.
There are a variety of ways in which an apparently law abiding company may unwittingly become involved in financial crime, without directly committing it at a business wide level.
- Corruption – individual members of a company taking bribes for contracts without their colleagues realising. Certain industries are more susceptible to this than others – for example, perhaps surprisingly, 73% of people working in forestry report that bribery is rife in their industry. (1)
- Handling stolen goods or money from their suppliers – once money has been successfully stolen or laundered by a company, any other company who supplies them will receive and become involved with laundered money, despite playing no part in the crime itself.
- Being a direct victim of financial crime
The cost of financial crime
A recent report into the statistics behind financial crime has revealed just how many businesses are victim to exploitation, and how much money they’re spending to fight back.
Of those surveyed, 47% of organisations were victim to at least one type of financial crime over a period of a year (1). And anecdotally, more than half of business owners across all industries believe that bribery, corruption and laundering are common practices.
There’s more than just the upfront financial loss of theft too – companies found to be unknowingly linked to fraud risk loss of customers, damage to reputation, and even prosecution.
72% of companies avoid high-risk customers as a means of combating fraud – rather than taking on those customers and vetting/managing them. That all represents lost income too, from customers who very well might have been legitimate.
Financial crime isn’t just a problem for individual businesses. Bad guys don’t pay tax on their ill gotten gains, so they’re stealing from their countries too – the billions in lost tax income undermines governments’ ability to pay for essential services such as schools and hospitals.
Another way in which companies pay the price for financial crime is fraudulent Direct Debits. Each year in the UK thousands of people find fraudulent Direct Debits taken out in their name, with an average of £540 going missing before the crime is spotted (2). Under the Direct Debit guarantee, the Direct Debit Originator is liable for these losses.
What can be done?
41% of businesses have never screened their third party suppliers (1). For many businesses this is near impossible due to the sheer number of interactions they have – it’s not uncommon for a larger business to use tens of thousands of vendors, suppliers and partners. And the more businesses you transact with, the more likely you are to encounter a scam, or unwittingly handle illegally obtained money.
High levels of financial crime aren’t occurring because of a lack of effort in fighting it. Companies spend on average 3% of their turnover on fighting financial crime, which adds up to billions globally. And yet, only 1% of criminal proceeds generated in the EU are confiscated by authorities. This is because the sheer number of transactions taking place across the world – billions of them every day – is too many to monitor.
This means that finding a way to intelligently screen those you interact with is key, preferably before any money has changed hands. Data analysis and detection of suspicious behaviour is a vital part of fighting financial crime.
Fraud detection & prevention
At Unified Software we think that transaction monitoring and screening for suspicious financial activity are the keys to prevent ill-meaning customers from taking advantage of your company.
Bankval Enhanced detects suspicious Direct Debit transactions in real time. It gives you eyes outside your organisation – when a visitor enters payment information on your website, the system warns you if they have shown any unusual financial behaviour during the minutes, hours or days prior to arrival on your site.
Direct Debit fraud makes up a huge portion of financial crime, such as insurance scams. Under the Direct Debit guarantee, the Direct Debit Orignator is liable for losses – that could be your company.
Financial crime is an umbrella term for a wide variety of problems that will require a wide variety of solutions. But if your organisation collects payments via Direct Debit, BankVal Enhanced fraud prevention might be for you.