The Relationship Between Digital Banking and Financial Crime

Blog / The Link: Digital Banking and Financial Crime

Our financial habits are changing along with continually developing technology, like banking and banking activities. We see a severe increase in this area, especially in 2020. The global pandemic has brought digitalization to the fore in banking, as in every sector. Even if banks used digital banking before, the transaction capacity has increased fully. Without waiting in long queues at banks, we can perform all our banking transactions 24/7 from computers or mobile phones. However, with digital banking, which offers us many financial services simultaneously, there is a significant increase in the variety and rate of money laundering crimes. Multinational banking organizations must now acquire substantial resources to comply with many regulations in the jurisdiction.

What are the Money Laundering Methods in Digital Banking?

It is a fact that money laundering has changed in the digital age. As a result, businesses are now exposed to more risks. These are just a few of the activities that digital banking service providers are exposed to, such as accessing and copying user credentials, developing counterfeit software, or crypto money laundering in digital banking.

Digital banking allows customers to continue their activities by logging in with their digital profile information on a tablet, computer, or phone. However, this system causes financial criminals to conduct money laundering transactions without going to banks quickly. The actual person who accesses the financial institution account can hide his / her identity with this system. Moreover, it can perform this process from any part of the world.

Therefore, banks' chances of identifying and tracking financial criminals are greatly reduced. However, cash transactions made through digital banking are more challenging to identify than other money laundering activities. Therefore, criminals prefer to do money laundering through digital platforms. Besides, with the increase in digital banking activities, cryptocurrencies have become a new method for people. But also, cryptocurrencies are a new way of money laundering for criminals. Criminals carry out global money laundering transactions quickly due to the anonymity of digital currencies.

digitalization of the financial sector brought with it new money laundering threats, especially with mobile devices

Digital Banking Financial Regulators

In digital banking services, financial regulatory organizations such as the Global Financial Crimes Enforcement Network (FinCEN) or Financial Action Task Force (FATF) create laws to prevent such fraudulent activities and reduce the risk of money laundering terrorist financing. Banks must comply with these financial regulations published by global organizations. Otherwise, they could face large statutory fines.

For example, between 2009 and 2014, the US Bank was fined $ 613 million by the US Federal government for not having sufficient money laundering compliance. In an age where the risk of money laundering and terrorist financing has increased so much, it is critical for banking companies to take the necessary measures to reduce these risks with digital banking compliance.

What is Digital Banking Compliance?

Compliance enables banking companies to comply with laws, regulations, and rules and protect their integrity and reputation. The banking company should partner with AML data providers and establish a compliance department if any risk is encountered in customer relations and recruitment processes. Some of the central banking compliance issues reported by McKinsey include:

  •  Similar aspects of global economic activities are increasing.
  • Constantly changing the rules makes it difficult to provide up-to-date data.
  • The number of sanctions imposed by governments on their foreign policies is increasing.

Detailed guidance to learn AML compliance in the Banking Industry

How to Provide Digital Banking Compliance?

Some of the measures that digital banking service providers should take to reduce such risks are;  Specific tools should be used to collect low-quality data more effectively and identify money laundering risks. Criminals can access customers' data more quickly by performing multiple identity scans through these tools. Rather than analyzing and documenting all risk activities, focusing on high-risk activities will make a significant risk recognized faster. Advanced analyses ensure that actions with a high risk level are taken under control by evaluating customer risk and detecting suspicious activities.

The role of the compliance department in determining the potential risk level is enormous. The automatic provision of many data by robots speeds up the process of detecting money laundering activities. Therefore, it is necessary to establish more functional relationships with Anti-Money Laundering and Counter-Terrorist Financing organizations and increase staff concentration.

Real life case study for e-money and payment services' aml transformation

Why is AML Solution Necessary?

With this development of technology, money laundering activities have changed and become sustainable through digital means. Accordingly, digital solutions are developed against crimes. Organizations can prevent money laundering and avoid legal penalties with AML solutions designed with Artificial Intelligence.

Businesses can prevent potential money laundering risks with Sanction Scanner technology-compliant Money Laundering Solutions to strengthen companies' Anti-Money Laundering and Know Your Customer compliance processes. The Sanction Scanner's powerful API support automatically lets organizations check AML in seconds. The Sanction Scanner database is updated instantly, and organizations can control their customers 24/7 in this database. Check out our AML Sofware and contact us for more information to quickly comply with your company's AML compliance programs.

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