A staggering sum of over $3 trillion in illicit funds traversed the global financial system in the past year, as disclosed by the recently released '2024 Global Financial Crime Report' from fincrime technology firm Verafin, a Nasdaq-owned company. The report delineates the major contributors to this illicit flow, citing approximately $782.9 billion from drug trafficking, $346.7 billion from human trafficking, and $11.5 billion linked to terrorist financing. Notably, fraud scams and bank fraud schemes accounted for global losses of $485.6 billion.
Adena Friedman, Chair and CEO of Nasdaq, emphasized the collective responsibility of entities, stating, "There is an opportunity to work together on a framework and align on measures of success for effective anti-financial crime programs."
The report highlighted the challenges faced by Anti-Financial Crime (AFC) programs, including rising operational costs, legacy system inefficiencies, and siloed approaches. To address these challenges, the industry suggests the need for more tailored regulatory guidance, prioritizing financial crime, defining program effectiveness measures, fostering the adoption of artificial intelligence (AI), and promoting information sharing efforts.
Despite the increased risk of fraud associated with real-time payments, the report also pointed to a surge in cheque fraud, particularly in the United States. Out of $500 billion in fraud losses, almost $450 billion stemmed from payments, check, and credit card fraud. Cheque fraud alone resulted in over $20 billion in losses in the Americas, representing nearly 80% of total global cheque fraud losses.
Moreover, the report highlighted cyber-enabled scams, such as Business Email Compromise, resulting in $10 billion in global losses. Additionally, Romance Scams and confidence schemes contributed to nearly $4 billion in losses.
Brendan Brothers, Nasdaq’s Executive Vice President for Anti-Financial Crime, underscored the significance of the report, stating, "This report is an important step towards understanding the scope of financial crime."
The report surveyed over 200 anti-financial crime professionals from financial institutions in North America, conducting deep-dive interviews with several executives. The identified top threats and trends included real-time and faster payments, money mule activity, terrorist financing, and drug trafficking.
To stay ahead of emerging threats, industry professionals emphasized the importance of communication with law enforcement agencies, participation in industry-wide initiatives, and direct information sharing among financial institutions. The report also highlighted the challenges anticipated over the next 5-to-10 years, including compliance with regulatory changes, keeping pace with evolving financial crime risks, legacy technology limitations, and the increasing impact of non-compliance on financial and reputational aspects.
The report suggested opportunities for improved financial crime prevention, emphasizing the utilization of data and analytics, investment in new solutions and AI for detection, and collaboration with other financial institutions and industry groups. Furthermore, it outlined areas for improved regulation, including typology-specific priorities, private-to-private collaboration, encouragement of technology innovation, public-to-private collaboration, and incentivizing outcomes-focused programs.
The comprehensive report, based on data collection, research, and analysis performed by Celent and Oliver Wyman, sheds light on the intricacies of the multi-trillion-dollar challenge posed by financial crime.
By fLEXI tEAM