Friday's Final Word | week 25

Good morning! Look back at the week with us to discover some of the main stories of the financial crime landscape. Enjoy the update!

?? Mexican cartel aided by Chinese syndicate

?? HSBC’s Swiss arm violates AML rules

?? Deloitte predicts $40 billion in fraud losses

???? UBS sued by Russian oligarch

?? AI turns against scammers

?? Making AI regulation inclusive

Chinese 'underground bankers' accused of aiding Mexican cartel

The United States and China are hardly ever partners in anything, however, a recent case involving narcotics trade and money laundering has pushed both countries to bolster collaboration as they fight organized crime spanning the Pacific. In the USA, a years-long investigation dubbed Operation Fortune Runner had “uncovered a partnership between Sinaloa cartel associates and a Chinese criminal syndicate operating in Los Angeles and China to launder drug money”. On the American side, it’s the growing number of deaths from fentanyl overdose that is sparking concerns and a harsh response by authorities, whereas from a Chinese perspective, it’s the bypassing of currency controls that is found disconcerting.

Read full article here

Regulator finds HSBC’s Swiss private banking arm guilty of breaching money-laundering rules

HSBC’s Swiss private banking arm has been banned from taking on any new high-risk customers after Switzerland’s Financial Market Supervisory Authority (Finma) found the bank guilty of violating money-laundering regulations. The watchdog discovered that the bank had managed two high-risk business relationships without adequately checking the origins, purpose, or background of the assets involved. These high-risk transactions, which were poorly clarified and documented, occurred between 2002 and 2015 and totalled more than $300 million. HSBC denies any wrongdoing and plans to appeal the decision. In the meantime, the watchdog has ordered the bank to review all of its high-risk business relationships.

Read full article here

Deloitte predicts losses of up to $40B from generative AI-powered fraud

Deloitte predicts that generative AI-powered fraud, exemplified by incidents like the $25 million transfer triggered by deepfake avatars at Arup’s Hong Kong offices, poses a significant threat to the financial industry. They forecast potential losses in the US from such fraud to reach $40 billion by 2027, driven by increasingly sophisticated and accessible AI technology. The firm emphasizes the need for banks to invest in AI-based defences, biometric tools, and updated risk management frameworks to combat evolving fraud tactics effectively. Recommendations include collaboration with third-party technology providers and continuous training for anti-fraud teams to stay ahead of cybercriminals who are innovating swiftly. These future-proofing measures against fraud might seem costly, but they are dwarfed by the potential for losses.

Read full article here

Russian oligarch sues UBS over ‘unlawful’ money laundering alerts

Sanctioned Russian-Uzbek multi-billionaire Alisher Usmanov has filed a lawsuit against UBS, seeking damages for "breach of contract and tortious misconduct." The lawsuit targets the bank’s German subsidiary, accusing it of "unlawfully" reporting Usmanov to the Financial Intelligence Unit (FIU) on suspicions of money laundering. Usmanov's lawyers argue that these reports were baseless, citing routine transactions such as rent payments as being wrongly flagged as suspicious. The lawsuit claims that these accusations have "severely damaged Mr. Usmanov’s reputation" and caused him "significant financial losses." This case highlights the delicate balance financial institutions must strike between complying with regulatory requirements and serving their clients' needs.

Read full article here

AI chatbot fools scammers and scores crucial money-laundering intel

In a groundbreaking experiment, UK-based fraud-defence firm Netcraft has brought AI to criminals own territory, using AI chatbots to converse with criminals’ automated messages. The experiment has shown that large language models (LLMs) can effectively emulate victims, pushing criminals to reveal crucial information about the infrastructure which they use to con people out of their money. The two-year research project has uncovered bank account numbers at more than 600 financial institutions spanning 73 different countries. This method could be a game-changer for threat researchers and security teams as it flips the current asymmetry between attackers and defenders. For the moment, fraudsters use automation to launch attacks at scale, overwhelming victims and defenders alike, but through a system like this, the tides could quickly change.

Read full article here

AI talks leave ‘little tech’ out

Bolstering security and safety is a compelling reason for regulation, evidenced by the growing number of companies advocating for regulating AI technology. However, American venture capital firm Andreesen Horowitz argues that Big Tech often leverages regulatory influence more for control than genuine concerns over safety. This is reflected in the composition of the AI Safety and Security Board formed by the US Department of Homeland Security in April, which notably excludes representation from the startup scene. They caution that stringent regulations pushed by major AI companies could stifle open-source innovation, echoing past industry conflicts over software security in the 1990s. Without refuting the need for safety, they advocate for inclusivity in regulatory discussions to foster innovation and maintain US leadership in AI technology without hampering “little tech’s” opportunities.

Read full article here

Did you enjoy this newsletter? Subscribe today and stay up-to-date with industry news, trends, and insights!