NASDAQ: Banks Need Fintech Trust to Combat US$3tn in Fraud

NASDAQ examines the state of financial crime after US$3.1tn in funds flowed through financial systems in 2023; leveraging fintech key to anti-fraud efforts

NASDAQ has released its Global Financial Crime Report for 2024, which examines the state of financial crime today and its effect on the global financial system. 

Today, NASDAQ feels that impact is ‘profound’ after an estimated US$3.1tn in illicit funds flowed through the global economy in the past year alone. 

Money laundering was chief among fraudulent fund transfers, with trillions of dollars keeping destructive, criminal enterprises afloat. 

An estimated US$346.7bn flowed through financial systems to fund human trafficking, US$782.9bn to finance drug trafficking activity as well as US$11.5bn to fuel terrorist financing.

Another of the biggest criminal avenues was fraud scams and bank fraud schemes, which accounted for US$485.6bn in projected losses globally. 

Adena Friedman, Chair & CEO, NASDAQ, says: "NASQAQ has made the fight against financial crime central to our business... Now, we look forward to facilitating a more global conversation about how we can collectively defend our financial system against the financial criminals seeking to exploit it."

NASDAQ: Key avenues for fraud

Of course, to first stem the tide of fraud it is important to know the primary avenues it takes. NASDAQ’s research shows that anti-financial crime professionals are prioritising real-time payments (RTP) and other complex typologies in their fraud prevention efforts. 

Real-time payments fraud accounts for 52% of financial crime concerns among anti-financial crime professionals, followed by money mule activity (47%), terrorism financing (33%), drug trafficking (33%) and government benefits fraud (32%). 

The benefits of RTP as a fintech capability to better connect the world’s financial system are apparent, but where there’s technology there are always fraudsters looking to capitalise on it. 

As the pace of innovation hastens, so too is the speed at which new threats are emerging and making financial crime all the more complex. 

Leveraging fintech to counteract the rising tide of fraud

Somewhat ironically, the key for banks and FIs to combat new avenues of fraud created by emerging fintech capabilities is, in fact, to leverage more fintech capabilities. 

Of course, fraudsters shouldn’t stand in the way of innovation, and NASDAQ says most respondents to its report reaffirmed their trust in technology to combat fraudulent activity. 

Many banks are looking to new solutions such as artificial intelligence, data and analytics to help improve their financial crime efforts. 

While 62% of banks and financial services providers leverage intelligent document processing (IDP) and 50% have natural language processing (NLP) to help combat fraud, NASDAQ finds that only 44% of institutions leverage Robotic Process Automation (RPA) in their anti-fraud efforts, even less use machine learning (40%) and only 26% are employing Gen AI and Large Language Models (LLMs) to combat illicit money movement. 

Despite the low uptake for new technologies to help combat financial crime, NASDAQ expects 70% of banks and financial institutions globally to increase spending on AI and machine learning in the next two years. 

By doing so, these institutions will have a capacity 65% greater than what is currently in place to better detect fraud, and stem the tide of financial crime globally.

So, while the figures make for grim reading today, there is much hope for a future where financial crime is more robustly combatted and the money transfer avenues for fraudsters are greatly reduced. 

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