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

Vasil Sivenov

Interview with Vasil Sivenov Head of Prevention and Specific Control Department at Allianz Bank Bulgaria AD

Since 2014 Vasil Sivenov is Head of the Prevention and Specific Control Department at the Compliance and Regulatory Control Department of Allianz Bank Bulgaria AD.
Part of his career passed as head of the “Analysis” department of the “Financial Intelligence” Directorate /1998 – 2002/. He has gained extensive practical experience /23 years/ as an expert on measures against money laundering/terrorist financing, within a non-governmental organization he has participated in over 500 specialized seminars with leading credit institutions in Bulgaria with trained over 10,000 bank employees. Vasil has many additional trainings and qualifications in the field of Money Laundering and Counterterrorism, among them are:

• Certificate of Fraud and Financial Intelligence Course Metropolitan Police in London. Certificate by London Metropolitan Police, London, UK
• Certificate of Intelligence Analysis Course National Criminal Intelligence Service, Birmingham, UK National Criminal Intelligence Service

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?

For me, the traditional channels for generating dirty money such as drug trafficking, human trafficking/organs, qualified smuggling/excise goods, weapons, antiques/remain operational, but there is a powerful opening of new channels related to the rapid digitalization of the economy and new online based businesses, which opens up fundamentally new opportunities for organized crime groups, both at the national level and increasingly at the international level. The global Covid crisis has further added fuel to the fire of money-generating crime and given a powerful impetus to criminals globally. There are new ways related to the smuggling of masks, vaccines, fraud with funds that are intended to finance the victims of the crisis.

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

In principle, digitalization is associated with the rapid entry of new trends for remote onboarding of customers. Banks as conservative institutions, which until now mainly used only presence (face to face,) are now forced to keep up with these technologies. On the other hand, there is a high communication risk, which must be assessed and managed effectively, because the digital onboarding /identification and verification/ of customers has a higher degree of anonymity than the face to face process, and this is the fertile “soil” for fraudsters and money launderers. The challenges and responsibilities for AML Compliance staff in this regard are very high and require them to very carefully refine their internal procedures in order to proactively implement all policy instruments “Know your customer” based on the application of risk-based costs in order to achieve effective prevention of money laundering, incl. fraudulent schemes.

Are there new sources of “dirty” money?

As I said at the beginning, traditionally black system businesses that generate huge streams of dirty money remain operational. To these are added new ones, provoked by the rapid penetration of new cyber technologies – the whole spectrum of fraud based on social engineering and related to phishing, vishing, computer crimes, etc. The Covid factor definitely brings a special flavor and should not be underestimated.

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

Schemes are becoming more complex, with criminals being very resourceful and always looking for weaknesses in the banking and financial system. I would like to emphasize that in order to be able to successfully combat this complex crime, we must maintain very active cooperation, because the field of AML Compliance should in no way be seen as a competitive field between banks. We are facing a very well-organized criminal machine, which includes high financial, material and expert potential. That is why we must constantly share experience and expert know-how on new typologies of money laundering, fraud and active prevention tools in order to prevent the use of banking channels for money laundering purposes.

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

It is possible to increase as a result of the rising anonymity due to the digitalization of the processes. In this regard, it is important to build effective mechanisms for checking the reliability of employees and especially a system of effective control mechanisms and red flags, through which in advance, and not subsequently after the events to detect attempts at internal fraud by employees without sufficient moral foundations and low integrity.

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?

In principle, all banks, in accordance with national preventive legislation and global standards, apply a risk-based approach and should calculate all relevant risks related to the customer, the state, the products and the supply channels. The risk profile of the client is not a formal field in the client base, but should be the foundation for the effective implementation of measures against money laundering and as a result the minimization of regulatory and reputational risk.

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

Yes, definitely, the use of software solutions with artificial intelligence is not just a “memory of the future” and should be used, although it involves huge investments for banks as private entities, for which / I give a slightly “heretical” idea / would funding opportunities could be sought from EU funds and programs. But even the most intelligent system requires the involvement of the human factor – very well-trained and critical AML experts.

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