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Fraud and Financial Crimes: 5 trends to watch in 2022

As we settle into the new year, it’s only natural to ruminate what trends and changes we’ll witness in the months ahead. As someone who works in fraud detection technology, the optimist in me hopes ongoing advances in analytics, AI and other emerging technologies will stem the rampant, cross-industry fraud we’ve seen in the pandemic’s wake over the past two years. Of course, the realist in me recognizes fraud will always exist, and organizations must remain ever vigilant against shifting threats, come what may.

Early in the pandemic, governments around the globe enacted many new health and social programs to help alleviate the impacts of COVID-19, while public sector agencies and banks supported the distribution of benefits through newly forged digital programs. Financial firms, insurers, retailers and other businesses rolled out new digital channels at lightning speed. Lured by an abundance of stimulus programs and new digital avenues to exploit, criminals across the spectrum drove a seemingly ceaseless torrent of fraud.

The silver lining? A new fraud technology study by the Association of Certified Fraud Examiners (ACFE) and SAS, based on a survey of ACFE members worldwide, revealed that analytics proved indispensable in helping businesses across industries battle pandemic-driven fraud. The benefits were particularly evident in banking and financial services.

Almost half (45%) of banking and financial sector survey respondents reported that the COVID-19 pandemic accelerated their organizations’ use of data analytics to combat fraud. Nearly all (99%) indicated their analytics capabilities helped them boost the volume of transactions reviewed or suspected fraud cases identified; the timeliness of their anomaly detection; their efficiency in automating time-consuming tasks; and their overall accuracy (i.e., ability to reduce false-positive rates).

The road ahead
So, what trends will color the fraud landscape, for better and worse, in 2022? Here are the fraud and AML predictions I foretold in November, with a sharper focus on the financial services industry:

Prediction 1: Consistent digital customer experience becomes reality. Banks’ recent digital emphasis has been on securing new customers. Leading firms will expand this emphasis to create an enhanced, consistent digital experience for existing customers, one that spans the entire customer journey – from authentication and identity validation to credit and fraud decisions to digital marketing offers. Financial institutions’ IT staff will be challenged with the integration (and ongoing data management) of the wide range of third-party data providers required for making safe and accurate decisions in the digital landscape. With digital data orchestration hubs gaining wider adoption, technology firms have a great opportunity to manage the sourcing and enrichment of data to help reduce firms’ costs and time to benefit. Looking even further into the future, customer decisioning platforms will pave the way for real-time anti-money laundering (AML) transaction monitoring to prevent the movement of illicit funds.

Prediction 2: Evidence-based policing emerges at the forefront of modernization. Data from most countries shows that crime is rising. The traditional response of top brass has been to increase staff, but 2022 will bring a different approach. Law enforcement leaders will accelerate investment in technology to support intelligence-led and evidence-based policing. This technology will help officers make better decisions – based on reliable data – as they fight crime, including financial fraud. Just as important, law enforcement will turn this technology inward to proactively identify training and readiness issues among officers, holding themselves to a higher level of accountability to the communities they serve.

Prediction 3: “Super-investigators” come to the forefront as austerity measures continue. Organizations will continue to operate under budgetary and staffing constraints. Banks are no exception. To compensate, firms will further automate their financial crimes functions, including key steps in the detection and investigation process. Emphasis on automation and alert prioritization will shift traditional investigative functions to focus on the higher-risk, more complex investigations. These factors will give rise to “super investigators,” anti-fraud professionals able to interpret the output of analytic models and readily understand complex criminal linkages.

Prediction 4: Health care plays a central role in fighting inflation. With global price inflation well-above historical norms, central bankers will use the traditional tools of monetary policy as a counter balance. Though healthcare inflation has been tempered due to long-term contracts, healthcare expenditures in the US are increasing at a faster rate than the general economy (as measured by GDP). As such, cost controls will be in sharp focus, and budget chiefs will seek ways to lower healthcare expenditures – the biggest budget line item for most governments. Budget chiefs will demand greater health outcomes for the money spent and likewise seek to curtail healthcare fraud, waste, and abuse. Policy alone is insufficient to get these results, so government agencies will turn to data and analytics to better contain costs.

Prediction 5: Supply chain disruption spawns analytic transformation. While supply-chain fraud is nothing new, it will be a major global challenge in the year ahead as the pandemic continues to disrupt everything. Businesses have focused on the agile activation of alternative supply sources and organic versus well-planned supply chains. While concentrating on continuity and survival, businesses have de-emphasized risk management for supply chains. Fraudsters and criminal rings won't miss the opportunity to exploit this situation. Analytics will drive supply chain transformation as organizations strike the balance between continuity and survival on one hand, and risk management and fighting fraud on the other. Know Your Supplier (KYS) initiatives will be in focus, as organizations take a page from the banking sector’s Know Your Customer (KYC) playbooks. This will be further accelerated as sanctions continue to form amid the intensifying geopolitical environment.

One thing was abundantly clear in 2021: fraudsters quickly took advantage of pandemic relief programs and digital offerings that were rushed to market. Having learned those lessons, I am excited to see the agility with which the industry and individual firms address common risks and pitfalls as the pandemic wanes and the swindlers and tricksters adapt their tactics.

Banks have accelerated their use of analytics to fight fraud
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