Asset misappropriation, bribery, false invoices and financial statement falsification remained steady during the pandemic. In fact, fraud has increased dramatically since the beginning of 2020.
Fraud has occurred at an accelerating rate during the COVID-19 pandemic, especially in the US. The Federal Trade Commission received 2 million fraud reports from consumers in 2020. Consumers reported losing $3.3 billion to fraud in 2020, up 50% from the previous year. $1 billion of the losses reported last year involved imposter scams (FTC).
Cyber-criminals are turning away from traditional methods of fraud like contactless payments (down 20%) and paper checks (down 80%) due to the reduced number of face-to-face transactions during the pandemic (InfoSecurity).
The statistics for money laundering are equally alarming. Finbold’s Bank Fines 2020 reports that financial institutions were hit with $13.7 billion in fines and penalties related to Anti-Money Laundering (AML), Know Your Customer (KYC), data privacy, and the Markets in Financial Instruments Directive (MiFID).
Cryptocurrency has become a popular method for illicit funds and Chainalysis, a crypto investigation tool, traced $2.8 billion bitcoin moved illegally in 2019. More than half of this amount went to crypto trading platforms. Fighting this kind of crime is difficult - less than 1% of illegally gained funds are recovered (LegalJobs).
The United States Sentencing Commission reports that as many as 90% of those accused of money laundering were imprisoned, with an average sentence of 70 months (LegalJobs).
The US led the way in fines levied on financial institutions for breaches of AML, KYC and data privacy laws. In the first six months of 2021 US institutions were charged $711m in fines, followed by Switzerland ($85m), Norway ($48m) and the UK ($33m). Many in financial services believe the compliance system is no longer fit for the purpose, with Financial Action Task Force (FATF) rules ultimately encouraging banks to focus on protecting their reputation and bottom line rather than on reducing money laundering (InfoSecurity).
Graphs can identify fraud patterns because of their ability to illustrate complex patterns in high dimensional data,
In a recent Bankless Times article Katana Graph’s CEO, Keshav Pingali, explains the principles behind fraud protection using graph technology. In regard to fraud protection, Pingali uses the example of travel planning. Airports are the nodes, flights are the edges, and then networks of participants are established and relationships are identified between them. Which ones interact with each other? Which have unexpected exchanges implying an anomaly?
Katana Graph hopes to apply graph analytics to the developing fraud threats increasingly present since the pandemic. Digital payments have increased and are becoming the norm, making it more important to be able to identify relationships in real time as payments are being made. Graphs can identify fraud patterns because of their ability to illustrate complex patterns in high dimensional data,
notes the Bankless Times piece.
In addition to fraud activities, money laundering has become more difficult to detect using traditional rules-based monitoring systems. With Graph AI, a system learns on its own how to make inferences such as determining pattern abnormalities and identifying money laundering trends. Currency is moved from several and disparate sources through a complex network of accounts; a confounding process that is prompting many enterprises to seek better means of detection and prevention. Katana Graph’s all-in-one Graph Intelligence Platform can bring about deep and powerful insights into fraud and cyber-crime with unparalleled speed and accuracy.
Set up a demo to learn more about Katana Graph’s offerings.
Click here to read the full story on Bankless Times.
