Friday's Final Word | week 7

Good morning, everybody! The end of the week is once again here, and it's time to revisit the most pressing stories. Join us on our journey as we explore what's new in the financial sphere!

?? Romance scams on the rise

?? Crypto raises concerns over Elizabeth Warren's proposed bill

??? FCA stressing the need for industry cooperation

?? Alarming rise in crypto-fraud in Russia

?? Deepfakes shatter trust in facial biometrics

?? US proposes new AML rules involving financial advisors

The charming criminal – Romance scams are on the rise

It might sound like a frivolous mischief which probably can’t have that many victims, but the truth is that romance scams are a real thing with thousands afflicted and millions in losses. Demonstrating this is the staggering ￡92.8m lost in the UK alone last year, which came in from over 8000 reported victims. This number represents a 22% increase from the previous year, highlighting how with technological innovation, such as Generative AI and improved deepfakes, come more insecurity and risk. Financial institutions are fighting back, deploying AI to learn and then detect behavioral and biometric characteristics. But for the moment, based on the story the numbers are telling, it seems that the fraudsters are charming enough to succeed.

Read full article here

Blockchain Association raises concerns over Warren’s proposed crypto AML bill in letter to Congress

Elizabeth Warren’s proposed crypto bill hasn’t been well received by the industry, as demonstrated by a critical letter expressing concerns about the potential flight of capital and expertise from the American crypto landscape. The bill in question, named the Digital Anti-Money Laundering Act of 2023 would force American crypto players to conduct due diligence and KYC. The Blockchain Association, author of the letter, argues that such requirements currently applied to the traditional financial sphere would push crypto innovation overseas to unregulated offshore exchanges. According to their reasoning, this move would inadvertently hinder law enforcement and endanger national security, as the US would no longer have a stronghold of crypto within its own territory.

Read full article here

FCA update – Shifting the dial on financial crime requires a collective push

The UK’s Financial Conduct Authority (FCA) knows the challenges the financial sector is facing when it comes to curbing criminal activity. In its most recent update, the agency expresses optimism while emphasizing the need for cooperation among all involved parties. On the progress side, both enforcement action and crime prevention have yielded success stories, leading to criminal charges and an updated warning list, but key areas do remain where improvements can and should be made. Technological innovation, as expected, holds the top spot on the list, with cyber-crime demanding financial institutions to better engage with new technologies. Raising awareness among consumers should also be treated as a priority, as criminals still view them as the ‘weak link’. For more information, check out the FCA’s own press release.

Read full update here

Russian central bank witnesses alarming rise in crypto-related fraud

Russia has joined the list of countries that have realized that criminals tend to prefer crypto usage. In a recent report, Russia’s central bank reveals that the number of illegal participants in the financial market who use crypto themes is growing. This is demonstrated by the 1500 pyramid schemes that accept crypto as a payment method, representing almost 50% of all pyramid schemes reported in the country in 2023. However, while the use of crypto as a payment method in criminal activity is growing in popularity, crypto-related fraud itself has decreased, with global revenues from crypto scams declining 29.2% year over year. But, amidst sanctions imposed on Russian entities, Russian organized crime has developed a fondness for crypto as a tool for evading scrutiny. Consequently, following in the footsteps of global peers, Russia is promising an increased crackdown on money laundering.

Read full article here

Confidence in deepfake detection wavers as 30% of firms are predicted to shun using facial biometrics in isolation by 2026

The dream is a world where novelty is synonymous with something pleasant and positive. However, in today’s reality that’s just not the case, and this is especially true when it comes to AI with increased automation and improved deepfakes. Based on a new report from Gartner, due to AI’s enhanced capabilities, faith in deepfake detection is wavering, with 30% of firms predicting that they would stop using facial biometrics in isolation by 2026. The reason behind, as can be expected, is the rising sophistication of deepfakes that are proving better and better at looking genuine and real. Consequently, companies will have to expand their arsenal of verification techniques, augmenting biometrics with device detection and behavioral analytics. This means that AI doesn’t have to be a doom and gloom novelty, but for it to become something positive, good companies will have to stay creative, and when they do, then, after the settling dust can come fruitful blossoming.

Read full article here

FinCEN proposes rule to combat money laundering in investment adviser sector

Increased scrutiny is coming to the American financial sphere with US investment advisors being the latest to be required to start detecting and reporting suspected money laundering. These new requirements were proposed on Tuesday by the US Treasury’s Financial Crimes Enforcement Network (FinCEN), and they would apply to investment advisors who register with or report to the SEC. Up until now, these advisors haven’t been subject to comprehensive AML measures, unlike financial institutions, and according to FinCEN, this uneven application of AML controls have enabled bad foreign actors to gain access to the US financial system through investing in early-stage companies. In the past, FinCEN had drafted two similar rulings, but none had been completed, but the agency is optimistic that the third time its proposal will be adopted, enabling the US financial system to have even stronger guardrails against money laundering.

Read full announcement here

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