Financial Crime World

Financial Crime and Cybersecurity Risks on the Rise in US Virgin Islands

The U.S. Virgin Islands, a popular tourist destination and financial hub, is facing an increasing threat from financial crime and cybersecurity risks. As financial institutions navigate this complex landscape, regulators are sounding the alarm over evolving technological developments, geopolitical events, and interconnected financial networks that may increase these risks.

Regulatory Focus Areas

According to a recent report by KPMG, regulatory focus areas include:

  • Anti-money laundering and counter-terrorist financing frameworks
  • Fraud models, operations, and investigation processes
  • Insider corruption
  • Cybersecurity risk management
  • Crypto and digital assets, including non-fungible tokens (NFTs) and decentralized finance (DeFi) platforms

Strengthening Financial Safeguards

Regulators are urging financial institutions to strengthen their financial safeguards and implement robust risk management strategies to prevent illicit exploitation of access to the U.S. financial system. This includes:

  • Enhancing governance frameworks, including anti-bribery and corruption measures
  • Implementing robust risk programs that identify and mitigate fraud/scams directed at vulnerable groups, such as the elderly and military personnel
  • Strengthening controls in regulatory focal areas (FinCEN priorities)

Consumer Protection

Consumer protection remains a top priority, with regulators assessing companies on areas such as:

  • Account holds and freezes
  • Model development and validation
  • Payment sender/receiver authentication procedures
  • Oversight of synthetic identity fraud

Mitigating National Security Risks

The report also emphasizes the importance of mitigating complex and evolving risks that may threaten national security, including:

  • Domestic and international terrorist financing
  • Increased focus on OFAC and sanctions
  • Transnational criminal organizations
  • Drug and human trafficking
  • Synthetic identity fraud

Industry Expert Insights

Industry experts agree that fintech and payments companies must prioritize combating fraud, money laundering, and related financial crimes on their platforms. By leveraging technology and data to monitor activity, coupled with a deep focus on customer experience, companies can proactively identify trends and instill a strong culture of doing the right thing.

  • “Responsibly leveraging technology and data to monitor activity, coupled with a deep focus on customer experience.” - Fiachre O’Neill, Chief Risk & Compliance Officer at PayPal
  • “Companies should consider ways to eliminate antiquated technology, establish a mature conduct risk program, and strengthen controls in regulatory focal areas.” - Amy S. Matsuo, Principal at KPMG LLP
  • “Regulators will continue to assess companies on their ability to mitigate fraud/scams directed at vulnerable populations, such as the elderly and military personnel.” - John Caruso, Principal at KPMG US

Actionable Steps

To address these risks, financial institutions can take the following actionable steps:

☑ Add analytics and automation to client onboarding ☑ Eliminate antiquated technology ☑ Establish a mature conduct risk program ☑ Strengthen controls in regulatory focal areas (FinCEN priorities)

For more information on the report’s findings and actionable steps, download the full PDF at [insert link].