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Simeon Petkov is an expert with over 20 years of experience in the field of consulting, regulatory compliance, financial security, money laundering prevention, terrorist financing, fraud, international sanctions. Head of Compliance Operations at the Dutch neobank bunq and freelance consultant. Certified Regulatory Compliance Specialist by the Association of Luxemburg Compliance Officers and the Institute for the Dissemination of Financial Technologies in Luxembourg (ALCO/ITTF). Certified Money Laundering Prevention Specialist by the Association of Certified Money Laundering Specialists (ACAMS). Certified specialist in regulatory compliance in the field of international financial sanctions (FIN/BNPP). Certified Fraud Prevention Specialist at the Association of Certified Fraud Prevention Professionals (ACFE).
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?
Indeed, the situation related to the global pandemic and COVID 19 has led to a lot of changes in terms of preventing and combating money laundering, and more. On the one hand, global restrictions, including on the movement of goods and people, have led to the need and demand to digitize many of the services and channels of communication and supply not only in the banking sector but also everywhere. Quite naturally, those who are trying to legalize their criminal income are moving in the same direction from the other side and experiencing the same needs. We have seen the difficulties of criminal organizations in moving cash and indications of increased interest in digital trade, digital goods and services and crypto currencies. At the same time, this period of rather extreme measures, the lack of a unified approach by the governments of the various countries, have created an environment conducive to criminal groups through new gaps in the system and a complex factual situation internationally.
How does digital onboarding and the digitalization of banking processes, in general, affect money laundering activities?
Those banks, which had already embarked on the path of modernization and digitalization of their services and processes, were less surprised by the situation, but in any case the situation led to an acceleration of the processes of all market participants. However, I cannot say in any case that there is any significant advantage over fintech companies and neo banks. Rather, I believe that the changed environment and focus of regulators on digital channels and services may lead to more difficulties and challenges for these new market players who are trying to prove not only that they offer an alternative to traditional banks, but also the same level of security.
Are there new sources of “dirty” money?
I would not say that there can be any significant change in the way “dirty money” is generated. There may be a change in the dynamics of certain sources, but we cannot talk about major changes and new sources in general. Even the FATF’s increased focus on wildlife crime is, in my view, rather a belated focus on an old and long-standing phenomenon. Of course, the fraudulent schemes were quickly updated with characteristic aspects and details of the pandemic situation. But the people behind these schemes are characterized by ingenuity, ingenuity and innovation, and quick adaptation to the new environment and opportunities was rather expected. Corruption schemes, drugs, human trafficking, tax crimes and fraud, fraud with state and European funds and funds, etc., are all the same in a new environment.
Are the patterns of movement of “dirty” money changing?
There is, perhaps, the biggest change here due to the prevailing situation, which has sharply restricted the free movement of people, goods and capital to a significant extent. Focus on digital services and products and especially on crypto currencies. Both as an investment and speculative commodity, and as an easy and relatively anonymous means of moving money beyond the usual financial system. In certain areas and moments we have again seen an increase in cash transactions, which is something normal in conditions of uncertainty and crisis.
Do you think that the current situation will affect the increase of cases of internal fraud?
I would not say that we can talk about increasing the risk of internal fraud. In my opinion, things are a little different than in the case of external fraud related to the digital environment. The risk of internal fraud cannot be ignored, but its significance depends on many factors, internal corporate regulatory environment and culture, the applied measures for inspection and monitoring of employees for whom such a risk has been identified due to position and subject of activities.
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 my opinion, it is obligatory. I am not in favour of the idea of the new normal, but we should all be aware of the significant change in what is normal and normal behavior in extreme circumstances and a change in a number of external factors. The new situation requires updating the risk matrix according to established trends, monitoring for new typologies and schemes not used before in relation to certain participants in the financial system, the presence of many new players in the banking and payment services market, most of which carry different levels of risk and security. Restrictions have led to many free monetary resources looking for alternatives to investment, profitability, etc. These are funds of both criminal and legal origin. In this sense, the transaction profile has changed even for ordinary users of banking and financial services. This requires updating the risk matrices and profiles and monitoring.
Do you think that the use of artificial intelligence functionality would improve and make this process faster?
This is definitely one of the good solutions in the field. I believe that the accumulated data and information for the past year are sufficient for the training of these modules and the support of customer monitoring and prevention activities. These models are also considered to be far more flexible than traditional monitoring systems in adapting to new typologies and behaviors. At the same time, I do not think the time has come when machines will be able to completely replace human participation. Artificial intelligence systems and functionalities are still far from perfect and are still evolving and entering. The good combination of trained professionals in a good team and provided with the necessary equipment and technological solutions is still the only safe and good solution in the field.
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