The acceleration of technological advancements has boosted the digitalization process of the financial industry at an unexpected pace. This has resulted in two different outcomes for the financial world. The overall financial services industry evolved and quickly adapted itself into the needs of the global world, achieving a faster, more transparent, safer and more digitally-savvy user friendly financial environment. On the other hand, the financial criminals discovered new methods to exploit the system with different digital and technological means. As a result, fighting with financial crimes has become more challenging and important than ever. For the financial organizations, 2023 marked itself as the year that they needed to give utmost importance to become wary of the ever-changing financial crime trends to ensure they remain compliant and secure against reputational and financial damage.

Among the most prominent financial crime trends of 2023, fraud is one of the most common ones as it shows an upwards tendency both in terms of volume and number. Another conspicuous financial crime that’s on the rise in 2023 is cybercrime. Nevertheless, the technological enhancements in the financial world such as real-time monitoring, artificial intelligence (AI) and machine learning (ML),  have proven to be highly effective in detecting the crimes in 2023. On the legislative side, policymakers are fully aware of the alterations and needs of the financial industry therefore working on the stricter regulations and sanctions while also focusing on different areas such as non-banking. Finally, in the era of economical instability, the majority of financial institutions acknowledging the threat of a rise in the number of financial crimes, have changed the way they approach risk-management.

1. Rising trend on fraud

In 2023, fraud has shown an upward trend becoming one of the biggest and fastest growing financial crimes that’s committed by the criminals. Investment, identity, tax and credit card scams are among the most common forms of fraud in 2023. With the help of technological advancements such as AI, the fraudsters manage to create deepfakes to imitate the personal data and exploit the system.

According to the data, between 2020 and 2022, 46% of businesses in the world have faced fraud or other financial crimes. Another study revealed that in 2022, the cost of financial crime compliance reached $274 billion globally and is expected to increase in the upcoming years as the fight against the financial crime will need more investments by the businesses.

2. The real-time monitoring as an effective tool to detect crime

Real-time transactions are made possible via online or mobile methods and this feature has improved the user experience and the way businesses operate. As the tendency to use online banking services rises with an expectation to reach 3.6 users in 2024, the number of fraudulent transactions increases simultaneously. Therefore, real-time monitoring to detect and prevent financial crimes plays a vital role in 2023 for the financial industry. Customer due diligence processes including Know Your Customer (KYC), Anti-Money Laundering (AML) and Anti-Financial Crime (AFC) are to be equipped with a robust real-time transaction monitoring technology to screen and locate the financial frauds prior to happening.

3. Cybercrime increasing its share in financial crime trends

Cyberspace has expanded its presence into the financial industry by offering people and businesses various online services to conduct payments and other transactions. However, paying and buying online has created a vulnerability that cybercriminals found different ways to exploit such as ransomware attacks, phishing, ID fraud or stealing credit card data. According to a study done by Security Magazine, on a single day 2.000 cyberattacks occur, each happening every 39 seconds and the number is expected to increase as the tendency to use online services will continue going up in 2024 as well.

4. The supportive power of latest technologies: AI and ML

Artificial Intelligence (AI) and Machine Learning (ML) technologies help fortify the fight against financial crimes in several ways. The algorithms created by AI and ML are able to analyze big amounts of data in a shorter time and with higher precision supporting real-time monitoring activities. Also, AI technology can be used in different stages of AML compliance processes as it enhances automation and identification of suspicious financial activities.

As the number and variety of financial crimes increase, the regulatory burden of the financial institutions to comply with the ever-evolving regulations gets heavier. AI and ML technologies also reinforce the AML compliance and risk management processes of financial institutions and help them refrain from involvement with financial crimes that would damage their financial reputation. Security is another topic that AI and ML technologies cover to support financial institutions in their war against cybercrimes by analyzing the network system against any criminal activities and setting up firewalls so that cyberattacks can be prevented earlier.

5. Regulatory landscape getting more stringent

The digitalization of the financial industry has brought some challenges with itself in terms of the increasing threats of new forms of financial crimes and the expanding scope of the regulatory requirements. As a result, the focus of the regulatory bodies was on how to make the regulations and sanctions stricter in order to assure better monitoring, identification, prevention and elimination of money laundering and terrorist financing crimes. This trend in the compliance area seems to be continuing in 2024 with more rigid regulation updates to include as many new fields that might be vulnerable to financial crime such as the crypto world. Within this situation, the financial institutions need to ensure that they are in line with the fast-evolving regulatory domain and take precautions in advance.

6. Non-banking sector getting noticed

Professional financial services including but not limited to legal advisory, real estate brokers, accounting or strategy advisory are noticed by regulators as the sensitive services that might allow illegal assets to move within the financial system.  As the policy-makers continue giving special attention to the non-banking areas, AML compliance requirements will become more detailed and extensive which means the institutions will need more inclusive AML compliance tools. In addition to the traditional players of the financial industry, professional services that are clustered under the area of non-banking will need effective monitoring systems to protect themselves and their customers from getting involved with risky activities.

7. Changes in risk-management due to the economic recession

With the downward trends in the economical situations around the world, financial institutions expect to see an upward movement in the financial crime trends. Such criminal activities are not necessarily committed by professional criminals but ordinary individuals are also expected to be driven to minor illegal activities during the economically tough times. As a precaution, financial organizations change the way they approach risk-management with an additional customer onboarding and due diligence processes added to their systems.

To sum up, the financial crime trends of 2023 signal that the financial industry will continue evolving in 2024 as well to adapt itself to the new developments in the fields of technology and to find new solutions to the new threats emerging. It is crucial for financial institutions to remain aware of the latest trends and fulfill the related requirements in a timely manner for achieving a successfully working business that is protected against financial crimes.