Combating financial crime: challenges, collaboration, and innovation
- Mayank Sharma
- Jul 8
- 4 min read
Updated: Oct 2
Financial crime is a complex and borderless issue that affects individuals, businesses, and governments worldwide. From identity theft and human trafficking to money laundering and terrorist financing, the stakes are high. Effectively addressing this global challenge requires collaboration, advanced technology, and a shift towards real-time preventative measures.
The complexity of financial crime
One of the greatest challenges in combating financial crime is its multifaceted nature. It spans a spectrum from relatively benign incidents, such as first-party fraud (including chargebacks due to financial hardship), to large-scale, organized crime involving synthetic identities, terrorist organizations, and even geopolitical disruptions. The financial crime ecosystem is vast, with various players acting in distinct roles.
For instance, while financial institutions are often seen as the primary focus, they are only one piece of the puzzle. Telecommunications companies, technology platforms, and even individual consumers are often unwittingly involved. Research indicates that 87% of Authorized Push Payment (APP) scams originate on technology platforms, highlighting the need for broader industry accountability. Meanwhile, law enforcement agencies bear the critical responsibility of tracking down perpetrators, holding them accountable, and deterring future crimes. However, this ecosystem can only function effectively with active data sharing and collaborative efforts.
Additional hurdles include resource limitations, such as insufficient tools, expertise, or funding for effective anti-money laundering (AML) programs. Regulatory challenges, particularly those related to data privacy, further complicate cooperation between public and private entities, often hindering the sharing of information crucial for tackling transnational crimes.
The role of cross-border collaboration
Financial crime knows no borders, and criminals exploit jurisdictional gaps to operate across regions. Their activities often involve a web of interconnected crimes, such as drug trafficking, identity theft, and arms trade, all of which can fuel terrorism and corruption. This creates ripples that extend far beyond financial losses, impacting societal safety and political stability.
For instance, transnational criminal organizations (TCOs) and foreign terrorist organizations (FTOs) thrive on cross-border connections. Groups like Hezbollah, active in Lebanon, leverage ties with South American drug cartels and use regions like West Africa for laundering proceeds from cocaine sales. Addressing these interconnected networks requires a coordinated, international response.
Despite this, sharing data across jurisdictions remains a challenge. While there is broad recognition of the need for collaboration, concerns over data privacy, national sovereignty, and diplomatic tensions often impede progress. An example of this tension is the debate around designating certain drug cartels as FTOs. While this could enhance the legal framework for combating their activities, it risks alienating key partners in Latin America, potentially undermining broader cooperative efforts.
Harnessing technology to fight financial crime
Advancements in technology are transforming the fight against financial crime. Financial institutions and governments are leveraging tools like machine learning (ML), advanced data analytics, and entity resolution to detect and prevent fraudulent activities. However, the rise of generative technologies, such as GPTs and GANs, has introduced new challenges. These tools enable criminals to create synthetic identities, deepfake videos, and other forms of deceptive content, pushing fraud to unprecedented levels.
Fortunately, technology is also part of the solution. Systems like INTERPOL’s I-24/7 and Europol’s SIENA enable global data sharing, while intergovernmental organizations like the Financial Action Task Force (FATF) and the Egmont Group establish best practices for AML and counter-terrorist financing (CFT) initiatives. Despite these advancements, many current practices remain reactive, relying on suspicious activity reports (SARs) submitted after crimes occur. To outpace criminals, there’s a growing push for real-time data sharing and proactive measures.
Success stories and emerging best practices
Recent initiatives highlight the power of collaboration and technology in combating financial crime. For example, the “Tech Against Scams” coalition—comprising companies like Coinbase, Meta, and Kraken—has made strides in preventing online fraud by sharing threat intelligence and educating users. Similarly, UK telecommunications company O2 developed an AI-powered system called “Call Defence,” which analyzes phone numbers to identify and block scam calls.
Meta’s partnership with financial institutions, including NatWest and Metro Bank, provides another success story. Through a pilot program called “Stop Scams UK,” the collaboration identified over 20,000 scam-related accounts, preventing fraud before it could occur. This success led to the creation of the Fraud Intelligence Reciprocal Exchange (FIRE), a threat intelligence-sharing platform that enhances real-time prevention.
An emerging area of focus is behavioral biometrics, which authenticates individuals based on their unique patterns, such as typing speed and device interaction. When combined with traditional biometrics, shared analytics, and global threat metrics, this approach promises to significantly enhance fraud prevention capabilities.
The path forward
Combating financial crime requires more than isolated efforts by individual entities. Success lies in building a robust, interconnected ecosystem where technology platforms, financial institutions, law enforcement, and regulators collaborate seamlessly. A combination of cutting-edge technology, real-time data sharing, and proactive policies can outpace even the most sophisticated criminal networks.
While challenges remain, recent achievements and advancements provide a clear path forward. By uniting resources, fostering international cooperation, and leveraging innovative tools, the global community can take significant strides toward a safer and more secure financial system.
