Financial Crimes in Cyberspace Involvements, cybercrime involves using technology or virtual networks for criminal activities. According to top management and banking professionals, cyberspace is the biggest threat to financial crime. A study conducted on 200 white-collar seniors showed that cyberspace crimes have evolved as major risks for businesses.
The current challenge facing top-notch retail and investment banks is lack of technology to mitigate or combat financial crimes quickly enough.
The modus operandi of criminals keeps changing and financial institutions are unable to prevent cybercrimes with their technology. The criminals keep changing their tactics; thus, their next move is unpredictable. If seniors in banking and investment do happen to deal with criminals, it is like using twentieth century tactics to handle twenty-first century criminals, as Dean Curtis of LexisNexis Risk Solutions stated.
The pros of technology are not being utilized effectively to deal with criminals. The rules, regulations and costs that are required to deal with cyberspace criminals further worsen the problem. Since technology keeps getting upgraded at a faster rate, firms have to deal with higher associated costs. Furthermore, financial institutions have to deal with rising financial compliance costs.
The attack, known as “Wannacry” was the largest financial crime earlier last year that affected individuals, educational institutions, civic sectors, companies and hospitals in over 100 countries. In recent years, cybercrimes have increased dramatically and replace organized criminal activities. Research shows that top financial crimes include: identity theft, theft of sensitive information, intellectual property theft and corporate account takeover.
Identity theft involves stealing a person’s personal information. The criminal benefits when they are able to draw a financial reward or cause damage to personal information. The information could also be manipulated to commit crimes, for instance credit card frauds, tax evasion and others.
The purpose of identity theft is to purchase goods or services, rent or purchase houses, seek employment, gain access to health care or facilitate a line of credit. Identity theft may remain undetected for several months or a year or two. The criminals are able to retain personal records then misuse it for a massive crime.
This render financial and status damage to victims who may have to spend months to re-establish their identity. Cybercriminals can obtain personal information from multiple sources on the internet. They also operate via black markets to gain access to personal data.
Theft of sensitive data includes misusing personal data, unencrypted information on card and customer information. Victims are at risk of losing their reputation and incur huge financial losses. The cybercrime could be committed by copying data onto a flash drive and use it to compete or sell to a competitor. Even if institutions take measures to identify the crimes and restore data, the time lost enables criminals to commit more financial crimes.
Intellectual property theft includes stealing copyright data, such as eBooks, movies and music. Cybercriminals could also hack into the system to steal materials. They use entertainment material without payment and sell them for higher returns. Website features such as downloading, uploading and sharing easily enable criminals to gain access to materials.
Criminals may download the data and then sell it for profit multiple times.
A corporate account takeover happens when criminal obtain access to banking credentials, use software to hack into the financial system and steal funds from the victim’s account, causing a huge financial loss. The criminals may acquire login credentials by distributing malicious software via email.
The user may download the content, unaware that a criminal activity is in process. Secondly, the cybercriminal may hack into the victim’s computer system, avoid security check and conduct fraudulent bank transfers. Cybercriminals can get away with the crime if the financial institution is not stern about information security, controls and risk assessments.
How to mitigate financial crimes?
In order to prevent financial crimes, senior management needs to assume accountability for dealing with the costs of cybercrimes to businesses just like other financial costs. Seniors management should be actively involved to combat risks of financial crimes. What the management must consider is what strategies they would use to address the challenges, how they would be kept up to date on financial issues and whether the issues have worsened.
Financial institutions may have different organizational strategies to address financial crimes. Some institutions would report the risk to senior management while other firms may distribute responsibilities evenly. Senior management must promote coordination and information sharing across the wider network.
The questions that need to be considered include: who would be responsible for financial crime issues; does that person have sufficient knowledge and experience of tackling the crime; does the approach promote coordination and responsibility and whether the firm has sufficient financial resources to tackle the issue.
To comprehend the issue at hand, firms must understand the associated costs and risk of the financial crime. The institutions should consider: the risk of financial crime to the firm; how the firm will address the issue; whether the firm’s risk assessment is up to date; who is accountable for updating risk assessment; does the firm have resources to tackle the risks and lastly, whether the risks are recorded and handled systematically.
Moreover, the firm must update its policies and procedures that are in the best interests of the business. The agenda should be accessible, effective and understandable by all employees.
The top management must consider: how often the company’s policies are evaluated and at what level of the hierarchy; how it can prevent the financial crime risks; what strategies the first must undertake to combat new risks; how the firm can devise the agenda in a way that is understood by all the staff and how the information would be disseminated.
Those that are responsible must adopt the right attitude to deal with the challenges of financial crimes. Firms need to take streamlined steps to prevent criminals from taking advantage of their services. The associated risks must be coordinated to all the staff and information must be shared widely.
The management that is responsible for tackling the risks must be qualified and experienced. Firms must understand how different financial crimes complement each other. The risk assessment should be comprehensive and updated regularly. The policies and procedures should be reviewed and revised frequently to strengthen financial crime compliance.