Anti-Fraud and AML: Two Sides of the Same Coin


The trade group UK Finance recently published its annual fraud report, and the picture isn’t pretty for British consumers. Financial fraud in the country rose by 39% between 2020 and 2021. Of the 1.3 billion pounds ($1.8 billion) defrauded in that period, 583 million pounds ($706 million) was due to authorized push payment (APP) fraud.

More on this: UK Banks Held to Higher Standards as APP Fraud Skyrockets

APP fraud refers to any scam in which someone authorizes a payment after being tricked into doing so by criminals. These days, fraudsters often use social media platforms to approach their victims.

APP fraud can be incredibly complex. Some of the more sophisticated scams involve weeks or months of social engineering in order to convince people they are making a legitimate payment. Some APP tactics are as old as fraud itself: charm, lies and emotional blackmail. Others are at the cutting edge of digital technology: fake websites, hacked and stolen credentials, cyberattacks and compromised computers.

The problem for victims of APP fraud is that by the time they realize they’ve been duped, the money is usually long gone. In the digital version of a hasty getaway with the loot, as soon as a transaction is made, criminals quickly initiate the process of laundering the stolen money.

Most of the tools modern money launderers take advantage of have an important function in plenty of legitimate commercial activities.

Real-time payments help criminals bounce funds from account to account faster than ever. Cryptocurrency exchanges let them swap pounds or dollars out for less regulated and often untraceable digital assets. And it isn’t uncommon for non-criminal enterprises, from big banks to small businesses, to get caught up in the web of dirty money.

Related: FATF: International Crypto AML Framework is Lacking

The connection between fraud and money laundering is one reason why money laundering should be a concern for everyone. The fact that lawful businesses can unwittingly get swept up in criminal activity is another.

Clearly, the fight against fraud and the fight against money laundering have a lot in common. Because the two fields are symbiotic, the startups on the frontline against financial crime often deal in both anti-fraud and anti-money laundering (AML) technology. What’s more, digital tools for identity validation and threat detection don’t distinguish between the two.

Find out more: 5 EU Startups Making Waves in the AML Technology Space

Data and Actor Intelligence

At the cutting edge of anti-fraud and AML tech, companies like SEON help firms turn their interaction data into actor intelligence and optimize their authentication processes.

SEON takes a holistic approach to cybersecurity that recognizes money laundering and fraud are completely entwined. It’s why in an interview with PYMNTS, the company’s CEO, Tamas Kadar, emphasized the importance of sanctions lists: “It’s very useful for many businesses to check the sanction list and politically exposed persons lists to see if that individual who they’re interacting with is part of any of those lists,”  he said.

Read more: SEON CEO Says Rising Cyber Threat Requires Multi-Provider Security Approach

Rather than just being a compliance issue, having rigorous know-your-customer (KYC) and identity validation protocols in place can help businesses protect themselves and their customers from criminal activity.

Open APIs, user interfaces, websites and databases can all be attack surfaces for criminals. Yet these things can’t simply be locked away behind impenetrable firewalls. Instead, the modern cybersecurity posture increasingly focuses on collecting data about all interactions and analyzing it for suspicious activity.

Actor intelligence is a multidisciplinary approach to preventing fraud and money laundering that uses technology to assess threats based on known data. After all, manually mapping specific indicators like files and IP addresses and tracking changes over time isn’t effective or scalable.

See also: Currencycloud Hires Lucinity To Fight Money Laundering

If a malicious actor is trying to breach a database, it doesn’t matter whether they’re trying to steal customer data as part of a fraud attack or to cover their own steps as part of a money-laundering operation. With the right security in place, the activity will be flagged as suspicious and a crime can be prevented.

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About: More than half of utilities and consumer finance companies have the capability to process all monthly bill payments digitally. The kicker? Just 12% of them do. The Digital Payments Edge, a PYMNTS and ACI Worldwide collaboration, surveyed 207 billing and collections professionals at these companies to learn why going totally digital remains elusive.

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