Trends and challenges – a series of interviews with experts in the field of fraud prevention and anti-money laundering measures.

Martin Marinov

Interview with Martin Marinov, Head of Risk Management, iCard

Martin Marinov

Martin Marinov has over 10 years of experience in the field of risk management, Neobanks and Electronic Money Institutions. Martin has in-depth technical knowledge of the regulations of card organizations (VISA, MasterCard, AMEX, UPI, JCB, Bcard), regulating the process of issuing and accepting conventional payment instruments and those of a new type. Through his many years of experience in risk management, Martin specializes in integrating and building logical systems for monitoring and preventing financial fraud, money laundering, terrorist financing and regulatory compliance.

Last year was marked by an unusual event that affected public life in all possible ways. Of course, it changed the flow of cash flows – cash payments decreased and electronic payments increased, businesses such as restaurants and tourism almost ceased to function. Globally, lockdowns have restricted the movement of people and products and reduced the ability to generate “dirty money” such as drugs and trafficking in migrants, but at the expense of fraud to help those affected by the crisis. This, of course, led to a change in money laundering methods and a change in the channels for their movement.

What are the new trends in money laundering, according to your observations?

In recent years, there has been a complete change in the behavior of those who use financial instruments and institutions for purposes other than normal business or personal activities. Undoubtedly, the evolution of the FinTech industry, the modernization of banks, the emergence of the so-called neobanks, in a “favorable” Covid 19 situation, led to a change in methods of money laundering. In this line of thought, the main trend in the coming years, in my opinion, will be the adequate establishment of the real owner or individual standing and operating the device through which he moves his currency units. The reasons leading me to this conclusion are the following:

  • A boom in crypto currency trading that will change the overall look of the term “normal” behavior. In the coming years, we will see big turnovers coming from monetizing crypto currencies. Specialists in the field of risk management and anti-money laundering measures will find it difficult to identify “clean” from “dirty” funds.
  • The identification of the persons operating in the crypto platforms is still quite questionable, despite the attempts in this direction.
  • There are more and more “gray” companies and websites operating on the market, which help to disguise the digital identity and the possibility to use “mule” accounts, such as: sites for creating fake identification documents, sites offering software to disguise the digital profile of persons (IP addresses, data of browser sessions, data of the used devices or the so-called digital fingerprint). The topic is very broad, but, yes, we have an interesting few years ahead, in which people on both sides of the barrier will adapt to the new reality.

How does digital onboarding and the digitalization of banking processes, in general, affect money laundering activities?

Despite the availability of more and more automatic mechanisms and software for digital onboarding, I would say that there are still enough skilled subjects who handle them properly. In recent years, we have seen huge strides towards improving the process, but in the end it remains much riskier than the conventional one. In any case, this is a necessary change, and we as specialists face the challenge of finding new and new methods for its adequate application in the digital environment.

Are there new sources of “dirty” money?

I would say that the sources of dirty money remain quite stable over time – drugs, unregulated gambling, corruption schemes, human trafficking, tax crimes. Rather, I see a change in the channels they use to transfer these funds, namely: crowdfunding platforms, platforms that lend against crypto currencies, not to mention that there are financial institutions and electronic money institutions, who still use controversial methods to identify their customers and monitor suspicious transactions.

Are the patterns of movement of “dirty” money changing?

Schemes evolve daily and adapt very quickly to the new reality. As I mentioned earlier, they are concentrated in attempts to maintain anonymity and seamless stratification of funds through new transaction methods.

Do you think that the current situation will affect the increase of cases of internal fraud?

Looking through the lens of Covid 19 and the fact that more and more companies allow remote work, a number of concerns have been raised about the potential increase in internal fraud. In my opinion, everyone’s expectations remained unjustified, as it was empirically proven that this model of work is reliable enough with the introduction of adequate control mechanisms. In any case, everything depends on the classic triangle of fraud (Opportunity, Incentive, Rationalization) and how well its postulates are observed, namely regardless of the source (remote or office work), weak controls, not ethical top management and weak liability policies provide an opportunity for fraud. The high expectations of the management, the aggressive bonus schemes for the employees bring with them an Incentive for fraud; bad treatment of employees, bad example of management contribute to the rationalization of fraud. Yes, the truth is in the balance between all feathers.
Does the change in the market situation lead to a revision of the fields and values in the Risk Matrix for money laundering risk assessment?

The risk matrix is a very dynamically changing quantity, as the current situation simply accelerates the processes and sets a very interesting pace.

Do you think that the use of artificial intelligence functionality would improve and make this process faster?

I have always been somewhat skeptical about the adequate preparation of working models for the mass of financial institutions and banks. I believe that in the near future artificial intelligence will be an essential part of the life of every Risk Specialist, but currently and in the short term I would say that it will be an addition to the measures and controls to deal with money laundering. I believe that practical experience and the opportunity for in-depth knowledge will keep the human factor at the center of events for quite some time to come.

About NOTO

Notolytix Ltd. was founded in 2015 by a group of – fraud prevention & IT veterans, from global companies like Groupon, Paysafe and Rakuten 

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