• April 19, 2021
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FinTech has reached billions of customers with digital banking, e-wallets and digital payment services. Although some financial technology companies provide similar services as traditional banks, FinTech provides great growth with supportive solutions to the already existing banking sector.

Opening an online account might seem interesting and exciting because of the ease of its creation as well as offering the ability to open it from wherever you are. However this ease is what makes it enticing to people who want to abuse the privilege. These people may want it to perform a form of crime known as financial crime.

Why is it easier to open an online account?

The physical presence of the individual interested in opening an online account is unnecessary. The electronic money institution needs to collect a government issued ID and a recent utility bill and the verification is done either via email or through their phone number. This is also known as KYC or Know Your Customer and it is the bare minimum that the financial institution requires to ascertain the identity of an individual. Despite that, an individual can create as many accounts as they want.

Financial crime is defined as crime that is specifically committed against financial property. Some of the most common crimes facing the financial sector are money laundering, terrorist financing and identity theft. Organized financial crime includes all activities of organized crime groups which misuse financial or payment systems for financial gain.

The peculiarity of financial crime in relation to the common criminal crime is mainly the difficulty of the prosecuting authorities to recognize and deal with it. These difficulties are due to the numerous manifestations of financial crime, to its intangible movement through financial, stock exchange, banking and other transactions and mainly to the mantle of legality under in which it moves. In many cases, civil servants, prosecutors, judges and politicians are involved, which results in deficits in political will and action.

What causes a headache to the prosecuting authorities is the fact that it is easier for criminals to move money from illegal activities through an easy-to-create account rather than a traditional bank account where further documentation is required.

Financial criminals are often people who have specific knowledge and the expertise to use information and media. While specific knowledge is required, there is no specific profile of a financial criminal. Financial crimes are most often committed under the legal cover of business and professional activities, essentially constituting an abuse of the trust of the working parties. The perpetrators of financial crimes are legally and reasonably present at the crime scene as the above crimes are committed mainly in the private domain, which makes them invisible. The ground for the development of financial crimes is suitable due to the lack of information and control, but also the lack of effective accountability within companies and organizations. They are often associated with the opportunity-rationalization-motivation interaction.

AML: Anti-Money Laundering

By using AML screening and transaction monitoring, organizations have a more comprehensive view of the risk associated with each customer. With the correct use of AML compliance any organization is able to react properly and correctly to money laundering, terrorist financing and fraud-related risks. If an organization’s technology processes are efficient, the chances of identifying such risks are far higher and the user experience is not disturbed or sacrificed.

Technology helps in the prevention of financial crime all across the world, as Artificial Intelligence (AI), Machine Learning (ML) and Data Analytics are seen as the stages of evolution of technology. These software techniques make for easier reporting of exceptions and of detecting hacks. Also they prevent the out-of-system liability.

Dealing with financial crime requires specialized and continuous training of both law enforcement and control bodies, as the forms of occurrence of these crimes are constantly evolving and the damage from its commission is not always clear.

The legal treatment concerning financial crimes is somehow problematic and evidence occurring are often called into question. Deception as well as the establishment of a criminal organization are difficult issues to prove. The offense in question can be permanent and there is an inability to determine it temporally or geographically. Another problem is the minimal evidence available to law enforcement authorities due to the lack of eyewitnesses and as a result they are content with written evidence. Finally, most of the time both the prosecuting and the judicial authorities are unable to identify where the money that has been illegally obtained in the execution of the illegal act has been spent or fled. Therefore, they try to seize bank accounts, confiscate property or investigate the whereabouts of a person in order to identify the stolen funds.

As such, financial crime is complicated business which requires FinTech companies to reinvent and re-evaluate the ways that they perform their KYC, thus constantly evolving and keeping up-to-date with the forefront of technological advancements. In fact, this is one of the reasons that they can outperform traditional banks and provide more safety to their customers.

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