Collaborative AML/CFT Defense via the AFC Ecosystem
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In the intricate world of financial transactions, the battle against money laundering and terrorist financing (AML/CFT) has perpetually evolved, presenting a labyrinth of challenges that intertwine with the dynamic nature of financial crime. The current AML/CFT landscape is not only being shaped by the traditional methods of illicit money flows but is also being constantly disrupted by innovative criminal tactics that leverage technological advancements.
In an era where data is synonymous with power, collaborative analytics and data pooling emerge as potent weapons in dismantling the fortresses built by financial criminals. Collaborative analytics refers to the collective effort of various entities to analyze data patterns, identify anomalies, and derive actionable insights to mitigate financial crime. On the other hand, data pooling is the practice of aggregating data from diverse sources, providing a richer, more holistic view of transaction patterns, thereby enhancing the ability to detect anomalous activities. Together, they forge a robust mechanism that amplifies the capability to discern, understand, and counteract illicit financial flows.
No institution, regardless of its size or capability, can single-handedly navigate the treacherous waters of financial crime. It is through the amalgamation of experiences, insights, and data from various global entities that the financial sector can construct a formidable defence against the nefarious undertakings of money launderers and terrorist financiers. The collective vigilance not only enhances the detection capabilities but also fortifies preventive measures, ensuring a more secure and resilient financial ecosystem.
The Rising Tide of Financial Crime: A Call for Collective Action
As the financial landscape becomes increasingly digitized and globalized, the specter of financial crime looms larger, casting a shadow over the integrity and stability of financial institutions worldwide. The nefarious networks of money launderers and financiers of terrorism have adeptly adapted to the digital age, crafting intricate schemes that often blur the lines between legitimate and illicit transactions.
Unmasking the Evolving Face of Financial Crime
The emerging financial crime typologies and techniques are as varied as they are innovative. From exploiting digital currencies and leveraging online platforms for layering transactions to utilizing trade-based money laundering schemes, criminals have demonstrated an astute ability to navigate the digital financial realm.
The advent of technologies such as blockchain, while heralded for its security features, has also been manipulated to obfuscate illicit financial flows through decentralized finance platforms and cryptocurrencies. These evolving techniques not only challenge the traditional approaches to AML/CFT but also necessitate a reevaluation and adaptation of existing preventive frameworks.
Unifying Forces: The Indispensable Need for Collaborative AML/CFT
In the face of such sophisticated and pervasive financial crime, a unified, collaborative approach in AML/CFT is not merely beneficial but utterly indispensable. The multifaceted nature of modern financial crime transcends borders, sectors, and individual institutional capabilities.
A siloed approach to AML/CFT is not only ineffective but also perilously myopic in the face of global financial crime networks. A unified strategy, which amalgamates the knowledge, expertise, and data from a myriad of entities across the globe, provides a more holistic, robust, and adaptive defense mechanism against the ever-evolving tactics of financial criminals.
Case Studies on the Impact of Collaborative Efforts
Exploring case studies from various sectors can shed light on the tangible impact of collaborative efforts in mitigating risks and combating illicit activities. For instance, the collaboration among various countries in the European Union, through platforms like Europol, has enabled the dismantling of numerous money laundering networks by pooling resources, intelligence, and expertise.
Similarly, in the healthcare sector, collaborative efforts among pharmaceutical companies, researchers, and governments have been pivotal in addressing challenges, such as the rapid development of COVID-19 vaccines. These instances underscore the potential of collaborative efforts in not only addressing but also preemptively mitigating risks and challenges through shared knowledge, resources, and coordinated action.
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Unveiling the Potential of Collaborative Analytics in AML/CFT
In the intricate and covert world of financial crime, the ability to discern patterns, predict trends, and preemptively mitigate risks is paramount. Collaborative analytics emerges as a beacon in this endeavor, illuminating the obscured pathways through which illicit funds traverse. It not only enhances the visibility of transactional flows but also amplifies the collective capability to thwart financial criminals in their tracks.
Collaborative Analytics: A Symbiotic Approach to AML/CFT
Collaborative analytics can be defined as a synergistic approach wherein multiple entities share analytical resources, insights, and data to enhance their collective ability to analyze, understand, and act upon shared challenges. In the context of AML/CFT, collaborative analytics plays a pivotal role by enabling financial institutions, regulatory bodies, and other stakeholders to pool their analytical capabilities and data to identify, understand, and mitigate money laundering and terrorist financing risks more effectively. It transcends the limitations of individual capabilities, providing a more comprehensive, nuanced, and adaptive understanding of financial crime patterns and trends.
Steering the Ship with Data: The Impact of Data-Driven Decisions in AML/CFT
The impact of data-driven decisions in identifying and mitigating risks cannot be overstated. In the realm of AML/CFT, data-driven decisions enable institutions to move from a reactive stance to a more proactive, predictive approach in managing financial crime risks. By leveraging data analytics, institutions can identify emerging risks, discern patterns, and predict potential future trends in money laundering and terrorist financing activities.
This not only enhances their ability to mitigate risks but also enables them to allocate resources more effectively, streamline compliance processes, and enhance their overall AML/CFT framework. The integration of collaborative analytics further amplifies this impact by providing a richer, more diverse dataset from which to derive insights and inform decision-making.
Data Pooling: A Synchronized Approach to Enriching AML Typologies
In the ceaseless battle against financial crime, data stands as both a shield and a sword, enabling entities to defend against and counteract illicit financial activities. Data pooling, in this context, emerges as a potent strategy, allowing for a synchronized, collective approach towards understanding and mitigating the multifaceted challenges posed by money laundering and terrorist financing.
Diving into Data Pooling: A Crucial Ally in AML/CFT
Data pooling involves the aggregation of data from various sources, creating a consolidated reservoir of information that can be analyzed to derive more comprehensive and accurate insights. In the realm of AML/CFT, data pooling becomes particularly relevant as it allows for a more holistic view of transactional patterns, enabling entities to identify and understand complex money laundering schemes that may span across multiple institutions and jurisdictions.
By amalgamating data from various entities, data pooling enhances the collective ability to discern anomalies, identify emerging trends, and develop more effective strategies to combat financial crime.
Federated Database: A Beacon in Detecting and Preventing Financial Crime
A federated database in AML/CFT serves as a centralized repository that amalgamates typologies, patterns, and insights from various entities, enhancing the collective capability to detect and prevent financial crime. This database does not merely serve as a storage facility for data but acts as a dynamic, evolving entity that continually enriches its data through continuous inputs from various stakeholders.
In the context of AML/CFT, a federated database facilitates the sharing of knowledge and insights among financial institutions, regulatory bodies, and other stakeholders, ensuring that the collective understanding of financial crime is continually updated, refined, and enhanced. This, in turn, fortifies the collective defenses against financial crime, ensuring that strategies and actions are informed by the most current, comprehensive, and accurate data available.
The AFC Ecosystem and Collaborative AML/CFT Initiatives
In the intricate maze of global financial transactions, the AFC Ecosystem stands out as a lighthouse, guiding the collective efforts of various stakeholders in navigating through the murky waters of financial crime. It not only illuminates the obscured pathways of illicit financial flows but also serves as a conduit for knowledge, expertise, and data, fortifying the collective defenses against the multifaceted threats of money laundering and terrorist financing.
Navigating Through the AFC Ecosystem: A Confluence of Knowledge and Technology
The AFC Ecosystem is a community-based platform that serves as a nexus for the sharing of information, experiences, and best practices in the battle against financial crime. It is powered by the Typology Repository, a living database that is continually enriched by the collective experiences and knowledge of a global network of financial institutions, regulatory bodies, and risk consultants.
The AFC Ecosystem not only provides a repository of money laundering techniques and schemes but also facilitates a collaborative environment where stakeholders can share, validate, and integrate typologies, ensuring that the collective understanding of financial crime is continually updated, refined, and enhanced.
Pillars of Strength: The AFC Network and Typology Repository
The AFC Network and Typology Repository serve as the foundational pillars of the AFC Ecosystem, each playing a pivotal role in enhancing the collective capability to combat financial crime. The AFC Network is a global network of subject matter experts who contribute the latest typologies, ensuring that the Ecosystem is continually updated with the most current knowledge and insights in the field of AML/CFT.
On the other hand, the Typology Repository is the largest federated database of money laundering patterns, contributed and validated by experts, providing a ready-to-use, exhaustive database from which typologies can be searched and integrated into Anti Money Laundering Solutions (AMLS) with a single click, ensuring that stakeholders have access to a comprehensive, up-to-date repository of financial crime typologies.
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Fostering Unity in Diversity: The AFC Ecosystem’s Collaborative Environment
The AFC Ecosystem fosters a collaborative environment among financial institutions, regulatory bodies, and experts, facilitating the sharing of knowledge, insights, and best practices in a secure, privacy-protected manner. Members of the network can easily create and share their typologies using a user-friendly interface, without compromising any customer information.
This collaborative environment not only enhances the collective understanding of financial crime but also fortifies the collective defences against it, ensuring that stakeholders are equipped with the knowledge, insights, and tools necessary to effectively combat financial crime. Through this collaborative approach, the AFC Ecosystem ensures that the battle against financial crime is not fought in isolation but is a unified, collective effort that leverages the diverse expertise, experiences, and knowledge of various stakeholders.
Integrating Collaborative Analytics and Data Pooling into the AFC Ecosystem
In the intricate web of financial transactions, the integration of collaborative analytics and data pooling into the AFC Ecosystem emerges as a strategic move, amplifying its capabilities in unmasking and mitigating the risks associated with Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT). This integration not only enhances the depth and breadth of the AFC Ecosystem’s Typology Repository but also fortifies the collective capabilities of its network in identifying, understanding, and mitigating financial crime.
Enhancing Collaborative Analytics within the AFC Network
Collaborative analytics within the AFC Network can be envisioned as a synergistic effort where experts from various domains converge to analyze, interpret, and derive insights from shared data. Strategies to enhance this include establishing a structured framework for data sharing and analytics, facilitating regular knowledge-sharing sessions, and leveraging advanced analytical tools and technologies.
Furthermore, creating a feedback loop within the network to continually refine and enhance analytical models and methodologies, and establishing a mechanism for recognizing and rewarding contributions can also amplify collaborative analytics within the AFC Network.
Enhancing the Typology Repository through Data Pooling
Data pooling from global contributors can significantly augment the Typology Repository, transforming it into a global tapestry of knowledge that reflects the collective experiences, insights, and expertise of various stakeholders. This involves not only pooling data related to known typologies and patterns of financial crime but also integrating insights, experiences, and case studies from various contributors, thereby ensuring that the repository is a comprehensive, dynamic entity that is continually enriched and updated.
Furthermore, establishing mechanisms for validating, verifying, and integrating contributed data, and creating a structured framework for categorizing and organizing pooled data can enhance the utility and efficacy of the Typology Repository.
Ensuring Data Privacy and Security in Collaborative Efforts
Ensuring data privacy and security is paramount in facilitating collaborative efforts within the AFC Ecosystem. This involves implementing robust data protection protocols, ensuring that shared data is anonymized and does not contain any Personally Identifiable Information (PII) or sensitive client information. Furthermore, establishing clear guidelines regarding data sharing, access, and usage, and implementing advanced encryption technologies to safeguard data during transmission and storage can fortify data privacy and security within the AFC Ecosystem.
Additionally, regular audits, assessments, and updates of data security protocols, and ensuring compliance with global data protection regulations, further strengthen the fortress of data privacy and security within the collaborative environment.
Future Prospects: Navigating the Path Ahead with Collaborative AML/CFT Initiatives
Embarking on a journey towards a future where collaborative initiatives shape the trajectory of Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) efforts, the AFC Ecosystem stands poised to navigate through uncharted territories. The integration of collaborative analytics and data pooling not only fortifies the present capabilities of the AFC Ecosystem but also sows the seeds for a future where collective efforts, shared knowledge, and unified strategies bolster the global defences against financial crime.
We call upon institutions, experts, regulatory bodies, and stakeholders across the spectrum to contribute to the AFC Ecosystem, to be part of a global network that stands united in the battle against financial crime. Your insights, experiences, knowledge, and expertise can significantly enhance the Typology Repository, ensuring that it is a dynamic, comprehensive, and up-to-date resource that reflects the collective wisdom, experiences, and expertise of the global community. Your contributions can amplify the impact, reach, and efficacy of the AFC Ecosystem, paving the path towards a future where collective efforts shape the trajectory of AML/CFT initiatives globally.
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Typology Tales July 2024: Account Takeover Surveillance
We are pleased to share the latest edition of "Typology Tales" for July 2024. This edition highlights the new typologies that our Anti-Financial Crime (AFC) community has carefully analysed and selected. Our community's collective efforts are crucial in staying ahead of evolving financial crime threats, and we are grateful for your continued participation and contributions.
AFC Community’s Role
Each month, our dedicated AFC community comes together to analyze and evaluate newly created typologies, selecting those that can significantly enhance the ecosystem's ability to prevent and combat financial crime. The typologies chosen for publication are those that offer the most promise in terms of effectiveness and applicability across various scenarios.
Key Highlights from July 2024
These typologies have been meticulously curated to ensure they provide robust and actionable insights, ultimately helping to safeguard the financial ecosystem.
Theme of the Month: Account Takeover Fraud (ATO)
Account takeover fraud (ATO) is a type of cybercrime where unauthorised people access a user's account and use it for harmful purposes. This dangerous activity has increased significantly in recent times, posing a growing threat to both individuals and organisations.
In this edition...
In this edition of Typology Tales, we delve into two typologies that compliance professionals can incorporate into their transaction fraud monitoring systems to proactively prevent account takeover in real time.
Typology 1: Surge in Multi-Party Transactions in Sizeable Values
A pattern of multiple parties making high-value transactions with one entity in a short period of time suggests possible account takeover fraud. This requires a strategic review of transaction behaviours.
How It Works
- The typology monitors transactions involving a single customer who receives or transfers funds with multiple parties within a short time span.
- To identify potential account takeover risks, the typology groups transactions by the unique identifiers of senders and receivers within a specified time frame. By tracking these identifiers over a defined period, it can determine how many different parties have transacted with a particular entity.
- Simultaneously, the typology aggregates the transaction amounts linked to unique senders and receivers.
- It flags any entity that engages in transactions with a large number of different parties and exceeds a cumulative transaction threshold. This signals potential account takeover risks due to unauthorised access and high-value transactions.
Typology 2: Monitoring High-Value Transactions Across Multiple Payment Modes
Financial institutions may implement advanced monitoring to detect high-value transactions between senders and receivers through various modes, aiming to uncover potential account takeover fraud.
How It Works
- To effectively oversee the flow of funds, the typology tracks and aggregates transaction amounts based on the mode of transfer.
- Transaction amounts, including those made through cash or alternative payments, are further aggregated by the unique identifiers of the sender and receiver over a specific period.
- Entities showing high-value transactions across multiple payment modes over specified time frames are potentially flagged as suspicious. This increased activity may indicate that an account has been compromised and is being used to funnel funds illegally.
From the Media: Account Takeover Attacks Overtake Ransomware as Leading Security Concern
Research by cybersecurity firm Abnormal Security highlights that account takeover (ATO) attacks have become a top concern for security leaders. The 2024 State of Cloud Account Takeover Attacks report reveals that 83% of organisations experienced at least one ATO incident in the past year.
Over 75% of security leaders rank ATOs among the top four global cyber threats, with nearly 50% facing more than five incidents annually and around 20% encountering over ten incidents. ATOs are now considered more significant than other threats such as spear phishing and ransomware.
Unite in the Fight Against Financial Crime
Financial crime is a pervasive issue that requires a collective, centralised approach to intelligence gathering. That's why we have created the Anti-Financial Crime (AFC) Ecosystem, a network of experts who work together to share knowledge and develop strategies for combating financial crime.
If you are an AFC expert, we invite you to join our efforts and help us grow the AFC Ecosystem. And if you know any other AFC experts, please refer them to us so we can continue to expand and strengthen our network. Together, we can make a real difference in the fight against financial crime.
Account Takeover Fraud: Monitoring Entities Incorporated Long Back
In the evolving landscape of financial crime, financial institutions need to intensify their scrutiny of transactions from entities with a long history of incorporation but sporadic or recent activity. This increased vigilance aims to detect and thwart potential account takeover fraud within savings accounts, ensuring the safety and integrity of financial systems.
Given below is a typology from Tookitaki's AFC Ecosystem. It details how to ensure your monitoring system triggers alerts transactions from entities with a long history of incorporation
Understanding the Typology
Setting Up Entity Historical Profiles
Financial institutions employ a function known as the "Incorporation Date of the Entity" to track and record the incorporation dates and transaction activities of entities. This function helps identify entities that have been established long ago but have shown recent or sudden transaction activities, which could be indicative of fraud.
Function Configuration and Data Aggregation
- Aggregate Fields: The system aggregates data on 'sender incorporation date' and 'receiver incorporation date.'
- Aggregate Function: Using the collect_set function, the system compiles a unique set of incorporation dates for each sender and receiver, providing a comprehensive historical perspective of each entity's transaction timeline.
- Group By: Transactions are grouped by unique identifiers like 'sender_hashcode' and 'receiver_hashcode,' linking each entity’s transaction history to specific account profiles.
Monitoring and Anomaly Detection
The system continuously monitors the transaction activities of these entities, comparing current transactions against historical data. Entities that have shown no or minimal transaction activities for a significant period since their incorporation are closely watched. A sudden spike in transactions, especially those of significant volume or frequency, triggers an alert. This scrutiny is particularly heightened if the entity's previous activity has been minimal or non-existent for years.
Flagging and Review Process
Transactions involving long-dormant entities resuming activity are flagged as high-risk. These flagged transactions undergo a detailed review to ascertain the legitimacy of the activity and to rule out any potential account takeover or other fraudulent intentions.
Investigative Measures
For flagged transactions, financial institutions conduct thorough investigations involving:
- Background Checks: Verifying the entity's background.
- Transaction Legitimacy: Confirming the legitimacy of the transaction.
- Entity Ownership: Ensuring the entity's ownership and operational status.
Preventative Actions and Customer Interaction
If fraudulent activity is confirmed, financial institutions take immediate steps to:
- Block further transactions.
- Secure the affected accounts.
- Possibly reverse fraudulent transactions.
- Contact entity representatives for further clarification and to ensure all parties are informed of the situation.
Compliance and Reporting Obligations
All suspicious activities are documented and reported in compliance with regulatory requirements. This ensures that the institution remains compliant with anti-fraud regulations and aids in broader efforts to combat financial crime.
{{cta-ebook}}
Enhancement of Monitoring Systems
Based on findings and trends observed from monitoring these entities, financial institutions continually refine their detection algorithms and update their monitoring systems to better identify and prevent potential fraud.
By closely monitoring the activities of entities incorporated long ago but recently active, banks can effectively spot unusual patterns that may indicate fraudulent activities, such as account takeovers. This proactive approach helps safeguard customer assets and maintain the integrity of the financial system.
Final Thoughts
Financial institutions must remain vigilant and proactive in monitoring and analyzing transaction activities, especially those involving historically dormant entities. This typology, sourced from Tookitaki's AFC Ecosystem, highlights the importance of advanced monitoring techniques in detecting potential fraud.
We encourage anti-financial crime professionals to join the AFC Ecosystem to access unique typologies and leverage community-driven insights for enhanced fraud detection and prevention. Together, we can strengthen our defenses against financial crime and protect the integrity of our financial systems.
The Globalization of Fraud: The Rise of Transnational Scams
In an increasingly interconnected world, the borders that once confined criminal activities are rapidly dissolving, aided by the rise of digitalisation and the pervasive reach of online platforms. The stark reality we face today is a landscape where fraudsters exploit digital payment systems to target individuals across the globe, particularly in the Asia-Pacific region. Organised fraud syndicates are not just local threats; they operate on an international scale, executing sophisticated scams that often outpace current preventative measures.
Case Study: A Transnational Crackdown on Job Scams
On 20 March 2024, a significant breakthrough came when the Commercial Affairs Department (CAD) of the Singapore Police Force and the Bukit Aman Commercial Crime Investigation Department of the Royal Malaysia Police joined forces in Kuala Lumpur. This joint operation was the culmination of extensive cross-border investigative efforts aimed at dismantling a formidable job scam syndicate.
Between October 2023 and January 2024, this syndicate deceived over 3,000 individuals, accumulating illicit gains of approximately $45.7 million. These scams primarily targeted Singaporeans, promising lucrative job opportunities that required victims to make upfront payments or divulge sensitive information under the guise of securing employment. The rapid escalation of these scams prompted an intensive collaborative investigation, which eventually led to the arrest of five Malaysians involved in laundering the proceeds from these fraudulent activities.
This operation not only highlights the severity and reach of transnational scams but also underscores the urgent need for global cooperation and shared strategies to combat these crimes effectively.
The Imperative of a Collaborative Approach
As we witness a surge in transnational fraud, the isolation of financial institutions in their silos makes them particularly vulnerable. The complexity and rapid adaptation of fraud strategies require that defences be equally dynamic and interconnected.
Collective Intelligence and Shared Responsibility
To counteract the evolving menace of cross-border fraud effectively, a collaborative approach is indispensable. The AFC Ecosystem initiative represents a commitment to fostering industry-wide cooperation and information sharing. Through this collective intelligence, we aim to establish a robust defence mechanism that not only identifies but also anticipates fraudulent activities, ensuring safe and secure societies. This shared responsibility is vital in creating an impenetrable barrier against the sophisticated mechanisms of modern financial criminals.
Considering the Typology of the AFC Ecosystem
Drawing from the AFC Ecosystem's insights, let's delve into the typology of transnational job scams. This framework is instrumental in understanding how these frauds operate and what measures can be employed to thwart their attempts.
Detailed Analysis of the Typology
Transnational job scams represent a highly organized and rapidly proliferating threat that exploits the aspirations of job seekers worldwide. These scams are not just about deceit regarding employment opportunities but involve intricate financial manipulations that siphon funds across international borders.
Operational Mechanics
- Initial Recruitment: The scam begins with contact through social media or other digital platforms, where victims are lured with high-return, low-effort job offers.
- Deceptive Promises: The roles are advertised as lucrative yet simple enough to attract a wide demographic, from students to the unemployed.
- Financial Prerequisites: Victims are persuaded to make upfront payments or provide personal information as a part of the onboarding process.
- Expeditious Expansion: To maximize profits before any potential crackdown, these operations quickly scale and replicate across various regions.
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Granular Red Flags and Risk Indicators
To effectively monitor and prevent these scams, it is crucial to recognise the following detailed risk indicators:
- Value: Transactions often involve small amounts that are usually perceived as low-risk by victims, making them less likely to raise immediate alarms.
- Volume: A high frequency of transactions complicates tracking and analysis, as the sheer number of transactions can overwhelm standard monitoring systems.
- Velocity: The rapid succession of payments, coupled with potential chargebacks or cancellations, creates a chaotic financial trail that is difficult to follow.
- Channels: Scammers predominantly use digital payment platforms, online banking, and occasionally cryptocurrencies to maintain anonymity and complicate tracing.
- Anonymity: There is often a mismatch between beneficiary details and the purported employer, signalling a red flag for transactions.
- Recurrence: Victims are frequently solicited for multiple payments under various pretexts, each justified as necessary for job commencement or continuation.
- High-risk Geos: Payments are directed to accounts in high-risk jurisdictions or to those that are otherwise unrelated or suspicious, lacking any logical connection to the job or employer.
- Geographical Inconsistencies: The involved countries often have no direct connection to the alleged job or employer, exploiting the complexities of international law and jurisdictional boundaries.
Harnessing Collective Efforts for Enhanced Security
The fight against transnational fraud is not a battle that can be won in isolation. It requires the concerted efforts of financial institutions, regulatory bodies, law enforcement, and the public. By adopting the typology provided by the AFC Ecosystem and vigilantly monitoring the detailed risk indicators, we can forge a path towards a more secure and resilient financial environment. This collective approach is our best defense against the sophisticated and ever-evolving landscape of global fraud.
Typology Tales July 2024: Account Takeover Surveillance
We are pleased to share the latest edition of "Typology Tales" for July 2024. This edition highlights the new typologies that our Anti-Financial Crime (AFC) community has carefully analysed and selected. Our community's collective efforts are crucial in staying ahead of evolving financial crime threats, and we are grateful for your continued participation and contributions.
AFC Community’s Role
Each month, our dedicated AFC community comes together to analyze and evaluate newly created typologies, selecting those that can significantly enhance the ecosystem's ability to prevent and combat financial crime. The typologies chosen for publication are those that offer the most promise in terms of effectiveness and applicability across various scenarios.
Key Highlights from July 2024
These typologies have been meticulously curated to ensure they provide robust and actionable insights, ultimately helping to safeguard the financial ecosystem.
Theme of the Month: Account Takeover Fraud (ATO)
Account takeover fraud (ATO) is a type of cybercrime where unauthorised people access a user's account and use it for harmful purposes. This dangerous activity has increased significantly in recent times, posing a growing threat to both individuals and organisations.
In this edition...
In this edition of Typology Tales, we delve into two typologies that compliance professionals can incorporate into their transaction fraud monitoring systems to proactively prevent account takeover in real time.
Typology 1: Surge in Multi-Party Transactions in Sizeable Values
A pattern of multiple parties making high-value transactions with one entity in a short period of time suggests possible account takeover fraud. This requires a strategic review of transaction behaviours.
How It Works
- The typology monitors transactions involving a single customer who receives or transfers funds with multiple parties within a short time span.
- To identify potential account takeover risks, the typology groups transactions by the unique identifiers of senders and receivers within a specified time frame. By tracking these identifiers over a defined period, it can determine how many different parties have transacted with a particular entity.
- Simultaneously, the typology aggregates the transaction amounts linked to unique senders and receivers.
- It flags any entity that engages in transactions with a large number of different parties and exceeds a cumulative transaction threshold. This signals potential account takeover risks due to unauthorised access and high-value transactions.
Typology 2: Monitoring High-Value Transactions Across Multiple Payment Modes
Financial institutions may implement advanced monitoring to detect high-value transactions between senders and receivers through various modes, aiming to uncover potential account takeover fraud.
How It Works
- To effectively oversee the flow of funds, the typology tracks and aggregates transaction amounts based on the mode of transfer.
- Transaction amounts, including those made through cash or alternative payments, are further aggregated by the unique identifiers of the sender and receiver over a specific period.
- Entities showing high-value transactions across multiple payment modes over specified time frames are potentially flagged as suspicious. This increased activity may indicate that an account has been compromised and is being used to funnel funds illegally.
From the Media: Account Takeover Attacks Overtake Ransomware as Leading Security Concern
Research by cybersecurity firm Abnormal Security highlights that account takeover (ATO) attacks have become a top concern for security leaders. The 2024 State of Cloud Account Takeover Attacks report reveals that 83% of organisations experienced at least one ATO incident in the past year.
Over 75% of security leaders rank ATOs among the top four global cyber threats, with nearly 50% facing more than five incidents annually and around 20% encountering over ten incidents. ATOs are now considered more significant than other threats such as spear phishing and ransomware.
Unite in the Fight Against Financial Crime
Financial crime is a pervasive issue that requires a collective, centralised approach to intelligence gathering. That's why we have created the Anti-Financial Crime (AFC) Ecosystem, a network of experts who work together to share knowledge and develop strategies for combating financial crime.
If you are an AFC expert, we invite you to join our efforts and help us grow the AFC Ecosystem. And if you know any other AFC experts, please refer them to us so we can continue to expand and strengthen our network. Together, we can make a real difference in the fight against financial crime.
Account Takeover Fraud: Monitoring Entities Incorporated Long Back
In the evolving landscape of financial crime, financial institutions need to intensify their scrutiny of transactions from entities with a long history of incorporation but sporadic or recent activity. This increased vigilance aims to detect and thwart potential account takeover fraud within savings accounts, ensuring the safety and integrity of financial systems.
Given below is a typology from Tookitaki's AFC Ecosystem. It details how to ensure your monitoring system triggers alerts transactions from entities with a long history of incorporation
Understanding the Typology
Setting Up Entity Historical Profiles
Financial institutions employ a function known as the "Incorporation Date of the Entity" to track and record the incorporation dates and transaction activities of entities. This function helps identify entities that have been established long ago but have shown recent or sudden transaction activities, which could be indicative of fraud.
Function Configuration and Data Aggregation
- Aggregate Fields: The system aggregates data on 'sender incorporation date' and 'receiver incorporation date.'
- Aggregate Function: Using the collect_set function, the system compiles a unique set of incorporation dates for each sender and receiver, providing a comprehensive historical perspective of each entity's transaction timeline.
- Group By: Transactions are grouped by unique identifiers like 'sender_hashcode' and 'receiver_hashcode,' linking each entity’s transaction history to specific account profiles.
Monitoring and Anomaly Detection
The system continuously monitors the transaction activities of these entities, comparing current transactions against historical data. Entities that have shown no or minimal transaction activities for a significant period since their incorporation are closely watched. A sudden spike in transactions, especially those of significant volume or frequency, triggers an alert. This scrutiny is particularly heightened if the entity's previous activity has been minimal or non-existent for years.
Flagging and Review Process
Transactions involving long-dormant entities resuming activity are flagged as high-risk. These flagged transactions undergo a detailed review to ascertain the legitimacy of the activity and to rule out any potential account takeover or other fraudulent intentions.
Investigative Measures
For flagged transactions, financial institutions conduct thorough investigations involving:
- Background Checks: Verifying the entity's background.
- Transaction Legitimacy: Confirming the legitimacy of the transaction.
- Entity Ownership: Ensuring the entity's ownership and operational status.
Preventative Actions and Customer Interaction
If fraudulent activity is confirmed, financial institutions take immediate steps to:
- Block further transactions.
- Secure the affected accounts.
- Possibly reverse fraudulent transactions.
- Contact entity representatives for further clarification and to ensure all parties are informed of the situation.
Compliance and Reporting Obligations
All suspicious activities are documented and reported in compliance with regulatory requirements. This ensures that the institution remains compliant with anti-fraud regulations and aids in broader efforts to combat financial crime.
{{cta-ebook}}
Enhancement of Monitoring Systems
Based on findings and trends observed from monitoring these entities, financial institutions continually refine their detection algorithms and update their monitoring systems to better identify and prevent potential fraud.
By closely monitoring the activities of entities incorporated long ago but recently active, banks can effectively spot unusual patterns that may indicate fraudulent activities, such as account takeovers. This proactive approach helps safeguard customer assets and maintain the integrity of the financial system.
Final Thoughts
Financial institutions must remain vigilant and proactive in monitoring and analyzing transaction activities, especially those involving historically dormant entities. This typology, sourced from Tookitaki's AFC Ecosystem, highlights the importance of advanced monitoring techniques in detecting potential fraud.
We encourage anti-financial crime professionals to join the AFC Ecosystem to access unique typologies and leverage community-driven insights for enhanced fraud detection and prevention. Together, we can strengthen our defenses against financial crime and protect the integrity of our financial systems.
The Globalization of Fraud: The Rise of Transnational Scams
In an increasingly interconnected world, the borders that once confined criminal activities are rapidly dissolving, aided by the rise of digitalisation and the pervasive reach of online platforms. The stark reality we face today is a landscape where fraudsters exploit digital payment systems to target individuals across the globe, particularly in the Asia-Pacific region. Organised fraud syndicates are not just local threats; they operate on an international scale, executing sophisticated scams that often outpace current preventative measures.
Case Study: A Transnational Crackdown on Job Scams
On 20 March 2024, a significant breakthrough came when the Commercial Affairs Department (CAD) of the Singapore Police Force and the Bukit Aman Commercial Crime Investigation Department of the Royal Malaysia Police joined forces in Kuala Lumpur. This joint operation was the culmination of extensive cross-border investigative efforts aimed at dismantling a formidable job scam syndicate.
Between October 2023 and January 2024, this syndicate deceived over 3,000 individuals, accumulating illicit gains of approximately $45.7 million. These scams primarily targeted Singaporeans, promising lucrative job opportunities that required victims to make upfront payments or divulge sensitive information under the guise of securing employment. The rapid escalation of these scams prompted an intensive collaborative investigation, which eventually led to the arrest of five Malaysians involved in laundering the proceeds from these fraudulent activities.
This operation not only highlights the severity and reach of transnational scams but also underscores the urgent need for global cooperation and shared strategies to combat these crimes effectively.
The Imperative of a Collaborative Approach
As we witness a surge in transnational fraud, the isolation of financial institutions in their silos makes them particularly vulnerable. The complexity and rapid adaptation of fraud strategies require that defences be equally dynamic and interconnected.
Collective Intelligence and Shared Responsibility
To counteract the evolving menace of cross-border fraud effectively, a collaborative approach is indispensable. The AFC Ecosystem initiative represents a commitment to fostering industry-wide cooperation and information sharing. Through this collective intelligence, we aim to establish a robust defence mechanism that not only identifies but also anticipates fraudulent activities, ensuring safe and secure societies. This shared responsibility is vital in creating an impenetrable barrier against the sophisticated mechanisms of modern financial criminals.
Considering the Typology of the AFC Ecosystem
Drawing from the AFC Ecosystem's insights, let's delve into the typology of transnational job scams. This framework is instrumental in understanding how these frauds operate and what measures can be employed to thwart their attempts.
Detailed Analysis of the Typology
Transnational job scams represent a highly organized and rapidly proliferating threat that exploits the aspirations of job seekers worldwide. These scams are not just about deceit regarding employment opportunities but involve intricate financial manipulations that siphon funds across international borders.
Operational Mechanics
- Initial Recruitment: The scam begins with contact through social media or other digital platforms, where victims are lured with high-return, low-effort job offers.
- Deceptive Promises: The roles are advertised as lucrative yet simple enough to attract a wide demographic, from students to the unemployed.
- Financial Prerequisites: Victims are persuaded to make upfront payments or provide personal information as a part of the onboarding process.
- Expeditious Expansion: To maximize profits before any potential crackdown, these operations quickly scale and replicate across various regions.
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Granular Red Flags and Risk Indicators
To effectively monitor and prevent these scams, it is crucial to recognise the following detailed risk indicators:
- Value: Transactions often involve small amounts that are usually perceived as low-risk by victims, making them less likely to raise immediate alarms.
- Volume: A high frequency of transactions complicates tracking and analysis, as the sheer number of transactions can overwhelm standard monitoring systems.
- Velocity: The rapid succession of payments, coupled with potential chargebacks or cancellations, creates a chaotic financial trail that is difficult to follow.
- Channels: Scammers predominantly use digital payment platforms, online banking, and occasionally cryptocurrencies to maintain anonymity and complicate tracing.
- Anonymity: There is often a mismatch between beneficiary details and the purported employer, signalling a red flag for transactions.
- Recurrence: Victims are frequently solicited for multiple payments under various pretexts, each justified as necessary for job commencement or continuation.
- High-risk Geos: Payments are directed to accounts in high-risk jurisdictions or to those that are otherwise unrelated or suspicious, lacking any logical connection to the job or employer.
- Geographical Inconsistencies: The involved countries often have no direct connection to the alleged job or employer, exploiting the complexities of international law and jurisdictional boundaries.
Harnessing Collective Efforts for Enhanced Security
The fight against transnational fraud is not a battle that can be won in isolation. It requires the concerted efforts of financial institutions, regulatory bodies, law enforcement, and the public. By adopting the typology provided by the AFC Ecosystem and vigilantly monitoring the detailed risk indicators, we can forge a path towards a more secure and resilient financial environment. This collective approach is our best defense against the sophisticated and ever-evolving landscape of global fraud.