Fraudsters are increasing hiding their dubious operations under the sheets and sheets of familiar paper trails, making their crimes much more difficult to prevent. However, by utilising the power of technology, financial institutions and crime-catchers stand a much better chance of fighting financial fraud.
This is an idea that is expanded upon throughout this guest piece by Tom Lyes, Head of Legal and Property at the Open Banking reporting tool Armalytix. Here Lyes examines how outdated reporting systems are allowing fraudsters to evade detection, whilst outlining how the use of technology could help to fill the gaps that cybercriminals regularly use to evade detection:
The final season of Netflix’s hit thriller, Money Heist or La Casa de Papel, launched last week, and viewers were treated to a thrilling end to the show – with the Professor hiding the location of gold in a long web of complex clues– giving the police no chance of success. Whilst this heist is pure entertainment, the story echoes a real-life trend of criminals increasingly using webs of printed paper to hide their crimes.
The recent release of the Pandora papers demonstrated that money laundering and fraud is rife – with criminals able to hide their crimes in huge piles of paperwork, leading investigators in the wrong direction, and meandering for so long that the criminals simply aren’t being caught.
Exacerbating the matter is the fact that the final line of defence – the employees – are short of time and often not specialised in fraud detection. Alongside this, the volume of paperwork is continuing to grow – burying financial, legal and conveyancing professionals, meaning that following the paper trails, once the source of all truth, is no longer the answer.
For businesses, the impacts of fraud go beyond the immediate financial risk. Data issues often lead to profound problems for the customers, going as far as someone having their house sold from under them. Stakes are high, and firm’s reputations are in jeopardy.
Luckily, there is a solution – we need to revaluate our obsession with paper records – and realise that although they can tell the truth, they often present an opportunity for criminals to hide. By wiping out unnecessary form filling, and only sharing data that is needed, we can help financial services firms, making them swifter and safer.
Goodbye to paperwork?
The system of sharing paper copies of bank statements from multiple accounts is outdated and cumbersome and risks regulatory and reputational issues down the line.
However, we don’t need to stick with this system – the technology exists for a form free future. One wherein centralised, automated data collection feeds into a rapid online check that shows proof and source of funds as well as performing account verification – providing firms with a simple and easily evidenced route to compliance.
These automated reports can also highlight regular transactions, provide account balances and flag any significant or irregular transactions so that this activity can be inspected further.
Ultimately, this means that compliance officers in legal and professional services can better conduct the necessary AML checks, with less time spent on lengthy tasks such as data collection and verification.
Businesses, such as conveyancing firms, who don’t have a strong source of fund check, or don’t check accounts accurately, are putting themselves on the hit list– they are risking significant financial damage, and critically risk brand damage. Failing to identify specific cases of money laundering places even the strongest firms in danger of being put out of business. A form free future eases the reliance on paperwork and removes these pitfalls.
Beyond improved risk management and security, automated data collection will significantly improve the customer experience by enabling customers to fill out forms in a user-native way, either on their phones or computers.
However, that’s not to say it’s simple. This requires a substantial thought shift, rethinking how paperwork is used – something that has been culturally entrenched for thousands of years. There are some barriers we need to overcome before reaching the paperless utopia.
Toppling the House of Paper
There are roadblocks to a technology-based reporting future that scare both businesses and customers alike. The rising prevalence and fear of cyberattacks have caused businesses that are resistant to new technologies to shut off to further digitalisation. For customers, frequent news stories on the dangers of data sharing mean that there is a constant lack of trust.
To tackle both of these issues, maximum transparency is needed to move to a paperless world. It is important for every layer of permissions to be conveyed, and for firms to make it clear to customers that their data is in their hands. They will know what data goes where, who the end-person they are sharing it with is, and why they are sharing it.
For smaller businesses, who lack immediate access to the right knowledge and resources, time is also a barrier. The ability to look past today and focus on what is happening tomorrow is frequently deemed a luxury. Instead, they will often only make significant changes when pushed to by a regulator. And still then, it takes a specialised, strategic thinker to deliver the necessary changes, which they often don’t have to hand among their limited human resources. This is when outsourcing digital transformation to third-party providers can really count, as technology can not only speed up time-consuming processes, but support businesses in only collecting the data they need, meaning there are fewer piles of paper to sift through.
Stop the Heist
Although Money Heist the show has come to an end, the crimes still go on in real life and businesses everywhere need to turn to a form free future to prevent criminals hiding behind the paper trail.
If we can do this in the right way, the benefits are clear. It helps improve security, increase customer satisfaction and mitigate the risk of brand damage and regulatory fines.
To become form free, we must put the work in now. The first challenge comes with changing customers’ opinions – proving to them that they can share data online safely and easily. This starts with making sure that day-to-day processes like signing and submitting forms are digitally enabled and transparent – making the benefits of this process obvious. By leveraging open banking technology to create a form free future, businesses can revolutionise how they request, prepare, and verify clients’ information. This will move us towards a new paperless world – removing the criminals’ playground and stopping the Money Heist in its tracks.