Fraudulent Transactions in Banking Continue to Plague US Minor Outlying Islands
Regulatory bodies are sounding the alarm over the persistent threat of fraudulent transactions in the banking sector across the United States Minor Outlying Islands. According to a recent report, financial service providers must continue to evolve their anti-money laundering and counter-terrorism financing frameworks to stay ahead of sophisticated perpetrators.
Ongoing Risks Posed by Fraudulent Transactions
The KPMG report “Ten Key Regulatory Challenges of 2023” highlights the ongoing risks posed by fraudulent transactions, including:
- Terrorist financing
- Beneficial ownership
- Sanctions evasion
- Consumer scams
- Compliance violations
Regulators are particularly concerned about the increasing use of shell companies, all-cash real estate purchases, and digital assets such as cryptocurrencies.
Need for Robust Cybersecurity Risk Management
The report also emphasizes the need for robust cybersecurity risk management to combat cybercrime, insider corruption, and fraud models. It warns that regulators will be scrutinizing financial institutions’ compliance with existing regulations, including those related to NFTs and DeFi platforms.
Growing Importance of Sanctions and Price Cap Compliance
In addition, the report highlights the growing importance of sanctions and price cap compliance, particularly in light of ongoing geopolitical tensions. Regulators are urging financial institutions to strengthen their controls and risk management frameworks to prevent illicit activities.
Regulatory Focus Areas
According to the report, regulatory focus areas include:
- Anti-money laundering and counter-terrorism financing frameworks
- Fraud models, operations, and investigation processes
- Insider corruption
- Cybercrime and cybersecurity risk management
- Crypto and digital assets
Interplay with Consumer Protection
The report also highlights the interplay between fraud prevention and consumer protection. Regulators are urging financial institutions to prioritize customer protection by implementing robust risk programs, conducting regular monitoring and testing, and providing clear communication to consumers.
Evolving Risks
The report warns that regulators face the challenge of mitigating complex and evolving risks, including:
- Domestic and international terrorist financing
- Transnational criminal organizations
- Drug and human trafficking
- Synthetic identity fraud
It emphasizes the importance of effective governance and risk management frameworks for financial institutions to navigate these risks.
Expert Insights
Experts from KPMG Regulatory Insights emphasize that financial institutions must prioritize fraud prevention and customer protection in today’s complex regulatory environment. “Companies should consider ways to responsibly leverage technology and data to monitor activity, coupled with a deep focus on customer experience,” says Fiachre O’Neill, Chief Risk & Compliance Officer at PayPal.
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