Friday's Final Word | week 18
Good morning! Welcome to Friday’s Final Word where we explore the latest news in the financial crime scene from famous crypto sentencings to fraud statistics and underground banking.
?? Sanctions evasion via underground banking
?? Binance CEO heads to 4 months in prison
?? How banks should invest in AI
?? KYC for the maritime industry?
?? Even more fraud in 2024
?? Japan’s AI diplomacy?
China firms go 'underground' on Russia payments as banks pull back
China has long been criticized for aiding Russia in its war against Ukraine by not enforcing the sanctions imposed by the West on the country. However, based on a recent Reuters investigation, it seems that Chinese banks are becoming more cautious lately, refusing to settle payments for Chinese businesses dealing with Russian entities. Consequently, many Chinese firms have had to leave the Russian market altogether, while those choosing to stay are seeking underground financial channels as the only remaining option amidst an increasingly elaborate sanctions regime that even China’s major banks have chosen to embrace.
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Binance founder is sentenced to 4 months in prison on money-laundering violations
Changpeng Zhao, the founder of Binance, the world’s leading cryptocurrency exchange, was sentenced to four months in prison on Tuesday after pleading guilty last year to charges of negligence related to money laundering. The short sentence is significantly lighter than the three years sought by the prosecution and pales further when compared to the 25 years received by Sam Bankman-Fried. Consequently, crypto skeptics are dissatisfied with the Department of Justice’s handling of the case, criticizing the department for not taking sufficient action to combat crime in the crypto sphere. Meanwhile, Binance has been making efforts to revamp its tarnished image, enhancing user identity verification on the platform to better comply with regulatory scrutiny.
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How banks should invest in AI technology
Artificial intelligence (AI) has long been a topic of interest in banking, but with the introduction of ChatGPT to the public, there's been a surge in discussions about the necessity of investing in this technology. What was once a question of whether to invest or not has now shifted to determining how AI investments should be executed. Established banks can either go it alone and build from scratch, prioritizing security but risking slow rollouts and significant expenses, or they can opt to partner with third-party providers, leapfrogging development but running the danger of data breaches and challenges in explaining their model's decision-making processes. Therefore, selecting the right technology provider to partner with is crucial, as it not only impacts competitiveness but also affects compliance and the ability to effectively serve a diverse customer base.
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Redefining smart ports: the role of digital identity verification
Identity verification has become a standard practice in the financial sphere, and amid the rise in fake news and disinformation, even social media platforms are slowly making use of it, not to be compliant but out of necessity. However, the benefits of Know Your Customer (KYC) checks extend beyond these domains, as illustrates this article which explores how user identification, and the adoption of biometrics could lend efficiency to the maritime industry. The change is not yet on the way with ports and shipping companies being somewhat slower in their digitalization journey, but the gains our nonetheless real with the potential for increased security at ports and improved operational efficiency.
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SARs and fraud in 2024: Expect more — lots more
Fraud continues to escalate, with no signs of abating, as indicated by the growing number of Suspicious Activity Reports (SARs) filed in recent years. The Thomson Reuters Institute has been closely monitoring SARs filings with the federal government’s Financial Crimes Enforcement Network (FinCEN), noting a yearly increase averaging 5%, a rate which has been accelerating since the pandemic. The outlook for 2024 remains similar, with data breaches fueling a surge in identity theft and the emergence of generative AI further complicating the criminal landscape. With fraudsters becoming increasingly sophisticated and the availability of criminal funds for reinvestment crime infrastructure on the rise, financial institutions are urged to intensify their investments in anti-fraud technologies and strengthen their Anti-Money Laundering (AML) and Know Your Customer (KYC) techniques to combat the fraud epidemic effectively.
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Introducing Japan’s AI Diplomacy
As the global race to regulate AI accelerates, there are more and more countries who aspire to become leaders in the sphere. While it’s often the USA and China who steal the headlines due to their ongoing economic rivalry, there are other contenders as well who have the ambition to shape international rulemaking. Japan is one of these countries, aiming to exploit the ongoing ministerial council meeting of the OECD to introduce Japan’s plan to launch a “friends meeting on AI issues” – a new dialogue framework on governing artificial intelligence (AI) technology. The goal of the framework is to foster discourse and subsequent cooperation around AI development between countries who are otherwise fiercely competing, with the intention of limiting those autonomous AI technologies that could be weaponized and therefore pose a danger to humanity.
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