What will the Anti-Financial Crime Landscape look like in 2024?

2023 in review

2023 was a busy year for regulators, financial institutions and criminals alike. Significant enforcement actions and fines were levied globally, with notable cases including Crown Resorts fined AU$450m, William Hill fined £19.2m, Deutsche Bank fined US$186 million, and Binance hit with a record-breaking US$4.3bn penalty. We also saw major new legislative developments – the US progressing the full implementation of the Corporate Transparency Act, the UK passing the Economic Crime Act and announcing a pioneering mandatory reimbursement scheme for authorised push payment (APP) fraud, and the EU introducing the Markets in Crypto Assets Regulation (MiCA). The G20 adopted a roadmap on crypto assets, and the Financial Action Task Force (FATF), the IMF and various national bodies issued numerous new standards and guidance for regulated entities.

On the other side of the coin, the threat environment remained fluid. The ongoing Russian invasion of Ukraine prompted numerous rounds of fresh sanctions, and the resumption of active hostilities in the Israel-Palestine conflict raised questions around current trends in terrorist financing. Meanwhile the global fraud “epidemic” showed no signs of abating, with criminals using both traditional methods and AI-driven innovations.

The constant adaptability of criminals, geopolitical uncertainty and shifting political priorities mean some things are hard to predict in 2024. However some things are foreseeable – legislative changes scheduled for introduction this year, priorities and areas of focus highlighted by regulators, and trends like tech-enabled ID fraud that are bound to continue. So what can financial crime practitioners and investigators expect in 2024?

Fraud

In 2023, global fraud reached alarming levels. In the first six months alone, over £500m was lost to fraud in the UK, and S$330m in Singapore. Notable trends included a rise in APP fraud, crypto scams including so-called ‘pig butchering’, and AI-driven fraud like ‘deep fakes’. 

On the plus side, the year also saw some key initiatives and new legislation. The UK announced a national Fraud Strategy and set out new legislation for mandatory reimbursement for APP fraud. In Singapore, regulators proposed a Shared Responsibility Framework (SRF) which unusually would hold both financial institutions and telecoms companies accountable for mitigating phishing scams and reimbursing victims. Elsewhere, financial institutions took action even without regulatory mandates. The US banks running the payment network Zelle agreed to reimburse fraud losses through the platform. In Australia, financial institutions launched the Fraud Reporting Exchange data platform to allow the near-instant reporting of scam payments, while in Spain three major banks launched a joint venture to combine their anti-fraud initiatives and share fraud information.

Fraud predictions for 2024

In 2024, we’ll see financial institutions up their game on fraud prevention, particularly in the UK where the new reimbursement requirement comes into effect in October. Consumer advocacy groups in other markets will continue to lobby for similar protections. In Europe, the implementation of the new Payment Services Directive 3 (PSD3) will introduce new IBAN name checks for all credit transfers, along with enhanced consumer protections for APP fraud.

Corporate transparency

Significant strides were made in corporate transparency in 2023. The UK passed the Economic Crime and Corporate Transparency Act which introduced significant changes due to come into effect in March 2024. The company registrar Companies House gained new investigation and enforcement powers, and will now verify the information it receives. Meanwhile the US announced the creation of its first ever federal register of corporate ownership, rolled out on 1 January 2024. Canada is also due to launch a new federal register later in January.

In January 2024, the EU agreed a deal on the text of a new directive which will guarantee access to beneficial ownership registries for interested parties, including regulators, law enforcement, journalists and academics. This finally addresses the implications of the EU Court of Justice ruling on beneficial ownership registries, announced in November 2022, which led to registry access being revoked or restricted in many EU countries.

Corporate transparency predictions for 2024

The new measures discussed will take time to bed in and there have already been criticisms about data gaps, loopholes in filing requirements, and lack of enforcement. Nevertheless, these changes should mean a greater amount of corporate ownership information becomes available to financial crime fighters and investigators.

Sanctions 

In terms of sanctions, 2023 continued where 2022 left off, with Western governments imposing more restrictions on Russia, and Russia developing more creative techniques to evade them. New designations and regimes were also introduced in relation to other countries and thematic areas including Sudan, Iran, cryptocurrency scams, and human rights violations. Meanwhile Hamas’ attack on Israel in October highlighted the use of crowdfunding for terrorist financing and sanctions evasions.

Sanctions predictions for 2024

The main trend in 2024 is likely to be increased enforcement of the controls now in place. The US presidential election in November may change the country’s geopolitical and policy aims, resulting in new designations or areas of focus. Meanwhile, regulators focused on two key messages last year which they will continue to hammer home in 2024. Firstly, screening alone is not enough – firms must do more to identify related parties and the involvement of front companies and individuals. Secondly, all automated screening must be carefully planned and tested, must be explainable, and must be better calibrated to firms’ specific risks.

Artificial intelligence

2023 marks the year AI went mainstream, following the public launch of ChatGPT in November 2022. It is predicted to have both positive and detrimental implications for fighting financial crime. On the downside, in 2023 we saw increasing evidence of criminals using AI to offer fraud-as-a-service, for example sophisticated social engineering, credential stuffing attacks, and deepfakes created by generative AI.

However, the financial services sector is fighting back. AI is increasingly being used to automate anti-financial crime processes, resulting in greater efficiency and more effective outcomes, for example in identifying suspicious activity through transaction monitoring. Natural language processing and other AI techniques are being used to streamline and improve adverse media searches and other screening and OSINT research. Finally, firms are increasingly making use of biometric data to detect fraud.

AI predictions for 2024

There has been extensive discussion about regulating AI. The EU aims to introduce the world’s first comprehensive AI law, with a provisional deal reached in December 2023. In contrast, the US is not likely to pass comprehensive national AI regulations soon, but may introduce specific controls for financial services and other key sectors.  Regardless of any regulatory changes, financial institutions and criminals will remain locked in a game of cat and mouse, trying to gain an edge in harnessing the power of AI to either commit, or detect and prevent, illicit activity.

Conclusion: Opportunities to strengthen AFC measures in 2024

The constant rate and scale of change makes the financial crime fighter’s job challenging, and the development of new areas of risk and regulatory obligations can be intimidating. However, there are positive developments on the horizon, and opportunities to strengthen the anti-financial crime arsenal. As always, any external changes must go hand-in-hand with firms equipping their compliance and investigations teams with up-to-date knowledge and the best available tools to identify and stop financial crime.