Where Fraud and AML Are Headed in 2022


Where Fraud and AML Is Headed in 2022The emergence of the COVID-19 pandemic in 2020 drastically changed how people live and work. Digital experiences and channels became more important than ever. Businesses and financial institutions had to catch up by ensuring they offered digital transaction and delivery capabilities. But in addition to positive developments in these areas, organized crime rings prospered by exploiting new entrants to the world of digital experiences, government stimulus programs being rolled out, and greater anxiety throughout society.

While 2021 and vaccine rollouts brought back some semblance of normalcy, the world is still dealing with the ongoing pandemic. Financial institutions are continuing their digital investment by launching additional digital options and working to offer seamless, real-time interactions, and virtual currencies are gaining traction globally. But just as in 2020, bad actors are highly active and using these advancements for their own purposes.

Mule activity, synthetic identities, scams, and application fraud rates all skyrocketed over the last year, and those in the fraud and anti-money laundering (AML) industry are working hard to fight against them. Regulators are intensifying their pressure on financial institutions, fintech companies, and companies working with cryptocurrency to stay ahead of illegal activity, and fraud and AML leaders are looking to advanced technology, data, and collaboration capabilities to keep up.

Aite-Novarica Group has homed in on ten top trends shaping the fraud and AML space in 2022. Some of these trends are:

  • With more scam attacks will come more regulation. As scam activity continues to increase this year, financial institutions will need to step up their efforts to curb these fraudulent interactions. Regulatory and market pressure will ensure that this stays top of mind for financial institutions.
  • Open API banking will speed up the path to embedded finance. Businesses will continue to work toward integrating financial services into their customer engagement platforms as part of the end-to-end customer journey. They are also hoping to generate new revenue through embedded finance. This opens up a new pathway for sophisticated fraudsters, however. Financial institutions and businesses will need to prepare for secure solutions that protect vulnerabilities in API-driven finance.
  • Know Your Customer (KYC) will embrace automated intelligence. KYC has traditionally taken lots of time and labor for financial institutions to implement. But in 2022, investments will increase in automated KYC intelligence across financial services firms. Modernizing these efforts will allow for better customer experiences and more efficient financial crime risk management.
  • Regulators will crack down on tax cheats. The Pandora Papers shone a light on the global tax evasion crisis that is costing hundreds of billions, if not trillions, of U.S. dollars in tax revenue. These dollars are especially important as the impact of the pandemic continues to be felt and the U.S. budget deficit continues to grow. Regulators are going to crack down on tax cheats. Financial services firms should be prioritizing their KYC capabilities and financial crime control frameworks to ensure they aren’t at risk for enabling any tax evaders.

To learn more about the other top trends in fraud and AML, please read the full report Top 10 Trends in Fraud & AML, 2022: Braving the New Normal. You can also check out the recording of our January 25th webinar on this topic here.