How Tookitaki's AFC Ecosystem is Transforming AML Operations
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The financial sector has witnessed an increasingly intricate landscape of financial crimes in recent years. As technologies evolve and global transactions become more sophisticated, so do the methods employed by those wishing to exploit the system for illicit gains. Cyber-attacks, digital frauds, and complex cross-border money laundering schemes are just a few illustrations of the challenges the modern financial industry faces daily.
Such a backdrop demands more than just vigilance; it necessitates innovation. Traditional approaches, which rely primarily on static rule-based systems, are proving to be inadequate. These systems often lag, unable to adapt swiftly to the novel techniques devised by financial criminals.
Furthermore, as regulations around financial transactions tighten globally, there's a pressing need for a dynamic and effective solution to combat money laundering. This isn't just about safeguarding businesses; it's about preserving the integrity of the entire financial system and protecting innocent individuals from the repercussions of financial crimes.
The Traditional Challenges
At the very heart of the finance sector's struggles with money laundering is the continued reliance on antiquated AML systems. While foundational and once groundbreaking, these traditional mechanisms have shown certain glaring limitations in today's digital era.
First and foremost, traditional AML systems are predominantly rule-based. While they function on predefined rules set by human operators, they often fail to detect newer, complex illicit activity patterns. Criminals constantly devise innovative ways to launder money, and these rule-based systems find it challenging to adapt to such evolving strategies in real time.
Moreover, these systems frequently churn out false positives. For financial institutions, this translates to countless hours spent on investigating legitimate transactions, draining resources and diverting attention from genuine threats. This high rate of false alarms stretches the compliance teams thin and leads to significant operational costs.
Another fundamental flaw is the siloed approach that most traditional AML systems employ. Financial institutions, for various reasons including regulatory restrictions and competitive concerns, have been wary of sharing insights and data with one another. This lack of collaboration means each institution is left to grapple with financial crimes in isolation. Consequently, when a new money laundering technique emerges and is identified by one institution, others remain unaware and vulnerable to the same threat.
The Implications
The implications of this siloed approach are manifold. For one, it reduces the collective efficacy of the financial system in detecting and preventing money laundering. Additionally, it creates an environment where criminals can exploit the lack of communication between institutions, using the same illicit techniques in multiple places before getting caught, if at all.
In essence, while traditional AML systems have served a purpose, it's evident that they are not equipped to address the evolving challenges of the modern financial landscape. A more holistic, adaptable, and collaborative approach is imperative for the industry's future safety and integrity.
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Introduction to Tookitaki's AFC Ecosystem
In the vast and intricate world of finance, Tookitaki has emerged as a beacon of innovation and adaptability. Rooted in its core mission of fostering safe and secure societies, Tookitaki understands that the battle against financial crime requires an amalgamation of the latest technology and collective expertise.
Tookitaki, a name now synonymous with cutting-edge solutions in the financial sector, is not just another tech company. It's a vision-driven entity committed to revolutionizing the approach toward financial crimes. By consistently pushing the boundaries of traditional solutions, Tookitaki aims to be at the forefront of a more collaborative and efficient future for financial institutions.
Enter the Anti-Financial Crime (AFC) Ecosystem.
The AFC Ecosystem is Tookitaki's brainchild, designed as an answer to the numerous challenges that financial institutions face in the realm of anti-money laundering. But what truly sets the AFC Ecosystem apart is its essence as a collaborative platform. This isn't just a system; it's a community. A community where professionals and AFC experts congregate to unravel and expose the convoluted trails of money laundering and fraud.
This Ecosystem offers two primary components:
- AFC Network: A global nexus of seasoned professionals, comprising individuals from financial institutions, law firms, risk advisory agencies, and international NGOs. Their combined expertise becomes a formidable force against financial crime.
- Typology Repository: A state-of-the-art infrastructure housing an extensive database of money laundering and fraud typologies. Based on actual red flags from the real world, these typologies are contributed and verified by seasoned experts, ensuring authenticity and relevance.
In essence, Tookitaki's AFC Ecosystem is more than just a tool—it's a movement. A movement toward collaborative intelligence, shared expertise, and a united front against the shadows of financial crime.
Key Components of the AFC Ecosystem
The beauty of Tookitaki's AFC Ecosystem lies in its overarching vision and meticulously crafted components, each playing a pivotal role in the collective fight against financial crime. Let's delve deeper into the building blocks of this transformative platform:
AFC Network: The Global Hub of Professionals
- Its Collaborative Approach: In a domain as dynamic as financial crime, collaboration is the key. The AFC Network fosters a culture of shared intelligence, enabling professionals from across the globe to converge, exchange, and innovate. This synergy amplifies individual expertise, making the collective much more powerful than isolated entities.
- The Diversity and Depth of Expertise: By gathering experts from diverse backgrounds, be it financial institutions, regulatory bodies, or risk consultants, the network ensures a holistic perspective on the challenges and solutions in the financial crime space.
Typology Repository: The Heart of the Ecosystem
- Explanation of Federated Learning: At its core, the Typology Repository is driven by federated learning – a method that enables data training across multiple devices or servers while keeping the data localized. This ensures privacy and security, all while harnessing collective intelligence.
- Real-world Red Flags and Their Importance: Real-world scenarios are the backbone of the Typology Repository. The system ensures accuracy, relevance, and timeliness by focusing on genuine red flags, enabling professionals to act on actionable insights rather than theoretical possibilities.
The core components of the Typology Repository are: Typology Design Studio, Federated Insights Card and Federated Knowledge Base.
Typology Design Studio: The Workspace for FinCrime Professionals
- User-Friendly Design: The Typology Design Studio stands out with its intuitive, no-code interface, enabling professionals to design and map financial crime scenarios with ease. Its drag-and-drop functionality ensures that expertise, not technical know-how, remains at the forefront.
- Privacy-Centric Design: In an era where data privacy is paramount, the Typology Design Studio's commitment to anonymizing personally identifiable information (PII) while encapsulating the modus operandi of crimes ensures that the focus remains on crime patterns, not individuals.
Federated Insights Card: The Digitized Intelligence
Think of it as the DNA of a financial crime typology. Every approved typology is automatically converted into a Federated Insights Card, providing structured, actionable intelligence for institutions. This digital avatar of crime patterns serves as a quick reference, enabling rapid decision-making in dynamic situations.
Federated Knowledge Base: The Community-Curated Database.
Here lies the power of collective wisdom. The Federated Knowledge Base houses a plethora of Federated Insights Cards, creating the world's largest community-driven library of financial crime patterns.
- Smart Select and Smart Discover Features: Navigating such a vast repository is made effortless through Smart Select, a free search field providing precise matches based on input. Meanwhile, Smart Discover adds an intuitive layer, allowing users to apply multiple filters, leading them directly to relevant insights cards.
Each component of the AFC Ecosystem, while powerful on its own, gains exponential strength when functioning within the collective. Together, they represent Tookitaki's commitment to redefining the future of anti-money laundering operations.
Benefits of Using the AFC Ecosystem
As financial crime methodologies continue to evolve, institutions need solutions that are not just responsive but are proactive and ahead of the curve. Tookitaki's AFC Ecosystem offers a suite of benefits that address both the current challenges and future threats in the realm of financial crime. Here's a closer look at the tangible advantages of integrating this ecosystem into your operations:
Comprehensive Risk Coverage
The multifaceted nature of the AFC Ecosystem ensures that institutions are shielded from a vast array of financial risks. From traditional money laundering patterns to newer, more intricate schemes, the system's real-world red flag repository ensures that threats are identified and neutralized in real-time, offering unparalleled risk mitigation.
Scalability and Agility in Response
The dynamic nature of the financial industry, especially in the digital age, demands solutions that can easily scale and adapt. With the AFC Ecosystem, financial institutions are not bogged down by cumbersome legacy systems. Instead, they can swiftly respond to regulatory changes, emerging threats, and evolving business needs, ensuring that their anti-money laundering measures are always a step ahead.
Cost-effective Compliance
One of the main challenges of traditional AML systems is the significant resource and financial investment they demand. The AFC Ecosystem turns this on its head by leveraging technology and community-driven insights. This drastically reduces the manual effort required for compliance, leading to tangible cost savings without compromising on efficacy. Institutions can now channel these savings into other growth-driving initiatives.
Community-driven Insights and Collaboration
The proverb "it takes a village" rings particularly true in the fight against financial crime. The AFC Ecosystem embraces this ethos wholeheartedly. The platform taps into collective intelligence by fostering a collaborative environment where experts from diverse domains share their insights. This enriches the quality of detection and prevention methodologies and ensures that institutions benefit from a continually updated knowledge base, built on shared experiences and expertise.
In essence, the AFC Ecosystem doesn't just provide tools; it offers a holistic approach to anti-money laundering. By intertwining cutting-edge technology with the wisdom of a global community, it promises a future where financial institutions can operate confidently, knowing they are protected against the multifarious threats of financial crime.
Case Study: The Real-world Impact
The theoretical benefits of any system, while promising on paper, are truly validated only when applied in the real world. To elucidate the transformative potential of the AFC Ecosystem, let's delve into a real-world application: a leading fintech company's venture in Singapore's bustling digital banking sector.
The Scenario
In the heart of Singapore, where digital banking innovations were sweeping across the financial landscape, a next-gen fintech company aspired to carve a niche for itself. This burgeoning enterprise was eager to introduce its digital banking solutions, but the road to actualization was riddled with challenges.
Challenges Encountered
- Regulatory Compliance: Launching in compliance with the stringent regulations set by the Monetary Authority of Singapore (MAS) was paramount. The evolving nature of these regulations necessitated a dynamic solution, which traditional systems could not provide.
- Typology Definition: The fintech needed to precisely define typologies based on local rules, a cumbersome task demanding expertise and time.
- Implementation Speed: In the fast-paced digital realm, time is of the essence. Any delay in setting up robust AML controls would equate to missed opportunities.
The AFC Ecosystem's Intervention
Leveraging Tookitaki's AFC Ecosystem, the fintech company found solutions tailored to its challenges:
- Access to Federated Knowledgebase: This provided a vast reservoir of typologies, enabling the company to identify and implement those critical for MAS compliance swiftly.
- Expert-Validated Typologies: The fintech could rest assured of the accuracy and relevance of the typologies, as they were curated and validated by seasoned AML experts.
- Rapid Implementation: With the ecosystem's tools at their disposal, the fintech managed to deploy over 20 typologies, spanning products like savings accounts, lending, payments, and SME banking, all in record time.
Tangible Outcomes
- Complete Risk Coverage: The fintech achieved an impressive 100% risk coverage, fortifying itself against potential financial threats.
- Swift Onboarding: Thanks to the AFC Ecosystem, there was a marked 50% reduction in the time taken to onboard new scenarios, accelerating their go-to-market strategy.
In conclusion, this case underscores the AFC Ecosystem's tangible potential in transforming the financial crime compliance landscape. By addressing specific challenges with tailored solutions, Tookitaki ensured that the fintech could seamlessly integrate into Singapore's digital banking sector, fortified against risks and compliant with regulations. The fintech's journey stands testament to the AFC Ecosystem's promise of delivering both efficiency and efficacy in the battle against financial crime.
Looking Forward: The Future of AML Operations with AFC Ecosystem
The rapid evolution of financial crime and money laundering schemes demands a dynamic, future-ready approach. Here's how Tookitaki's AFC Ecosystem is paving the way for the next generation of AML operations:
Setting the Pace for AML Operations
With its advanced technological underpinnings and community-driven approach, the AFC Ecosystem presents a paradigm shift in how financial institutions approach AML operations. Its proactive and adaptive nature ensures that organizations are not merely reacting to threats but are anticipating and mitigating them.
Collaboration: The Key to Global Resilience
As financial crimes become increasingly sophisticated and globalized, tackling them in isolation is no longer viable. The AFC Ecosystem emphasizes the power of collective intelligence. By fostering collaboration across diverse stakeholders, it harnesses the collective expertise and insights of the global community, ensuring that institutions are always several steps ahead of potential threats.
A Glimpse into the Future
While the AFC Ecosystem is already transformative, its potential for growth and enhancement is vast. We can anticipate:
- Integration with Advanced AI and Machine Learning: This will further refine the detection of suspicious patterns, reduce false positives, and enhance predictive capabilities.
- Expanded Global Network: As more entities join the ecosystem, the depth and breadth of its intelligence will grow exponentially.
- Continuous Feature Upgrades: Features like Smart Select and Smart Discover may be augmented with more advanced search and filter capabilities, ensuring ease of use and greater accuracy.
Final Thoughts
In the ever-evolving financial crime landscape, standing still is not an option. Traditional AML operations, though foundational, are no longer sufficient in the face of sophisticated global threats. Tookitaki's AFC Ecosystem represents a bold step into the future of AML operations. By intertwining advanced technology with the power of collective intelligence, it offers a proactive and adaptive solution.
For institutions keen on ensuring a safer financial landscape and safeguarding their operations from the nuanced threats of tomorrow, embracing the AFC Ecosystem isn't just an option—it's an imperative. The call to action is clear as we look to the future: Let's come together, innovate, and forge a united front against financial crime. Join the revolution, and be part of creating a more secure financial world for everyone.
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Our Thought Leadership Guides
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.