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Banks cite payments, ID theft and Eastern Europe as emerging compliance threats

12 November 2008  |  11418 views  |  0 caution!

New payment methods, identity theft and Eastern Europe are identified by senior anti-money laundering and compliance professionals as the biggest emerging threats to the financial sector, according to a survey conducted by risk outfit Fortent.

New types of payment methods, including mobile banking, pre-paid cards, and 'virtual world' transactions, are expected to be a hot area of regulatory interest, according to the panel of 30 banking executives from regional national and global US banks. Survey respondents also cited identity theft as "presenting the greatest emerging threat" to their institutions in the area of financial crime.

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

When asked in which areas they expected to see greater regulatory interest over the next five years, 78% cited new payment products, including payment cards, mobile payments, and virtual world transactions. Forty-three percent (43%) also expected heightened interest in trade finance.

Indeed, mobile payments have already appeared on the radar of regulatory agencies: the March 2008 International Narcotics Control Strategy Report (INCSR) entitled 'Mobile Payments: A Growing Threat', describes the potential exploitation of m-payment technology by money launderers, criminals, and terrorists (see: The mobile money laundry).

Compliance professional surveyed by Fortent also felt that bank competition for retail deposits might lead to failures in due diligence as branch staff were pressured to open more accounts.

In identifying particular geographic threats, Eastern Europe (excluding Russia) leads the world as the region that has experienced the biggest increase in suspicious activity related to money laundering, according to respondents. This region was followed by Russia, Middle East/North Africa, and the rest of Africa.

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