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Future of Financial Crime

Jersey, Guernsey, Isle of Man and Gibraltar

The Islands and Gibraltar Advisory team share the latest series of articles, which set out our thinking on the Future of Financial Crime.

Financial Crime is growing in complexity and continues to cause huge economic and social harm linked to money laundering, fraud, human trafficking, sanctions, and terrorism.​

As gatekeepers to the financial system, financial institutions are key in fighting this threat, investing significantly in time, resources and money, and are being held to increasingly high standards - by government and regulators, law enforcement, shareholders, customers – all demanding financial institutions protect their customers and society. ​

Yet outcomes against criminals remain poor and financial institutions face a number of drivers of change - an increasingly polarised geopolitical landscape, a climate crisis, significant transformation of the financial services industry with new players, new business models, and evolving customer expectations. And we cannot ignore continuous disruption from technology – faster payments, digital currencies, and AI – which is not only changing the way the financial services industry operates, but also enables organised criminal networks to scale and accelerate the sophistication of their attacks.

Against this volatile and complex backdrop, the Financial Services industry has reached a 'reset moment': a time to rethink the response to financial crime.

A 'reset moment'

Drivers of change

Our research has looked at a range of drivers of change and considered the impact of these on the evolution of the financial crime function over the next 5-10 years.

The market and regulatory environment in which FS institutions operate is evolving, with new risks and threats continually emerging.  Geo-political instability is altering the counter-terrorism risk profile and sanctions landscape significantly, and modern slavery and human trafficking are on the increase, exacerbated by conflict and corruption in a number of countries. Climate change is leading to changes to migration patterns, creating new FC threats that criminals will exploit. Meanwhile, fraud has grown exponentially, being enabled by digitisation and technology.

The regulatory landscape is evolving in response to drive progress on national risk prioritisation and to enable the alignment of resources across the financial crime framework to highest risk areas. This will require a more dynamic control framework and better sharing of information. At the same time, a focus on Consumer Duty will add another dynamic to financial crime considerations, which may be conflicting.

The financial services industry continues to undergo significant transformation. Markets and products are being disrupted by new entrants; new business models have emerged, with a move to a digital first-approach to client interactions. Payments are faster and digital assets are introducing new types of risks whilst attracting greater regulatory scrutiny and increasing complexity of monitoring.

Customers and the workforce also have greater expectations of their financial services providers, wanting them to be more ethical, more transparent, more digital and to provide greater personalisation and flexibility of services.

The impact of technological change cannot be ignored. Digitisation and the potential for the seamless integration of data. AI, machine learning and cloud migration all create opportunities for increased innovation, information sharing and greater automation of increasingly sophisticated tasks including data capture, consolidation tasks, and, identifying complex patterns in data.

Yet technology advances also open up new channels for criminal networks to exploit, as they continually look for the weakest links in the financial system.

Article 2: Delivering a risk-based approach


What does this mean for the future of financial crime? 


Taken together, these drivers of change mean that current approaches to tackling financial crime are no longer fit for purpose. They also present an opportunity to consider what needs to be done differently; to innovate; and, to move towards a more dynamic, effective, and efficient model. ​

We believe moving towards the future state requires the implementation of six key changes:

1. Intelligence-led risk management

A proactive and intelligent risk management approach that adapts to evolving FC threats by adjusting controls on high-priority risks, enabling a Risk Based Approach (RBA) and reducing effort in other areas.

2. Dynamic Customer Lifecycle Management

A digital-first approach to Client Due Diligence (DD) that manages FC risks throughout the client journey. It uses trigger-based or perpetual KYC and ML/AI to automate and enhance risk investigation, focusing on significant risk changes after onboarding.

3. Convergence of monitoring capabilities

Integrated monitoring that aggregates risk indicators from traditional and non-traditional sources (e.g. Fraud, cyber, sanctions) to assess client risk and identify high-priority cases for focused investigation.

4. Operations – but not as we know it

Dynamic and interconnected operations that integrate AML, TM, fraud, and sanctions insights. Automation of manual data gathering, consolidation, and scoring tasks enables a smaller team of highly skilled investigators to flexibly focus on prioritized risks and changes.

5. Proactive and collaborative FIU

A proactive and capable FIU that prioritizes disrupting serious FC, identifying new risks/threats, collaborating with private and public partners, and driving discussions on FC. This FIU measures its impact through faster, higher quality, proactive reporting and disruption of criminals, focusing on areas of national priority.

6. Integrated data and technology infrastructure

A digital backbone that utilizes cloud-enabled technologies to provide a single, consistent version of the truth. This enables better internal and external data sharing and leverages AI/ML to identify complex patterns, improving effectiveness and efficiency.

How Deloitte can help

Deloitte Advisory in the Crown Dependencies and Gibraltar has expertise across Risk and Regulatory, Internal Audit, Cyber and Digital Forensics. We are part of the broader Deloitte UK team, giving us direct access to the wider UK network, resources and expertise.

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