In our latest Facing Change video, my colleague Steve Elliot interviewed Michiel Van Dyk, Head of Global Programme for AML and CTF at the United Nations Office on Drugs and Crime, to understand more about the impact COVID-19 has had on financial crime.
Michiel confirms the huge increase in cyber and digital crime over the past few weeks, which has already been well documented in the media. There have been reports of fraud and scams involving everything from non-existent hand gel and facemasks, to phishing emails claiming to offer cures for the virus. The root cause of this spike in activity, beyond pure opportunism, can be largely attributed to global travel restrictions and government imposed isolation measures as a result of COVID-19. Like many whose incomes have been suddenly cut off, domestic lockdowns have made it very difficult for many financial crime operations, such as trafficking and trade-based money laundering, to continue operating. Naturally many criminals will have turned their resourcefulness to finding other sources of income, with the internet being the most readily-available tool. In his interview, Van Dyk provides an example of someone with limited experience in this area turning to the dark web to learn fraud techniques from other criminals in a kind of illicit entrepreneurial mentorship programme.
Not surprisingly, the new fraud typologies emerging reflect the consequences of a population in lockdown around the world, with criminals preying both on people’s financial and wellbeing concerns. Financial and investment-based frauds are particularly prevalent, as populations grapple with losing incomes and piling debts. Likewise, criminals wasted no time in responding to the inevitable surge in demand for personal medical supplies and health equipment, posting fake websites and supplying substandard products, or just as often, not supplying them at all. Personal computers and hand-held devices are equally at risk from malware implanted via phishing emails and texts designed to prey on our anxieties, or catch us while we’re distracted.
To make matters worse, most organisations are grappling with new modus operandi at the very time they need to be extra vigilant. In many places, compliance teams have been redeployed and cyber defences have been compromised. This is especially the case in developing countries and parts of the world where AML and CFT controls were already weak. In another unfortunate consequence of these challenging times, Van Dyk reports that many Financial Intelligence Units, whose role is key to law enforcement in their respective countries, are being stripped down, or working from home at a limited capacity. In some cases they’re even closed altogether.
The overriding message to all firms is that despite clearly challenging circumstances, firms must not let their guard down: be alert, look at the digital risk and when it comes to identity authentication, make sure the customer who you think is your customers is REALLY your customer!
Both firms and FIU’s are likely to continue to see a huge spike in potentially illicit activity for as long as in-country lockdowns and mobility restrictions remain in place. With reduced human resource capacity, firms must consider how else they can remain effective at detection and prevention of financial crime – including the role that smart technology and AI can play in the analysis of trends to spot illegal activity.
The message to all compliance teams is clear. Redouble your efforts in know your customerprogrammes, even though your workforce may be dispersed. Don’t cut back on due diligence, and use the technology and tools that are widely available, cost effective and easily implementable, to make sure you don’t get caught out.