Cyber Scams Spurring More Cooperation Between Anti-Fraud and AML

By Daniel Bethencourt

A rise in computer-enabled fraud and related attempts to move the profits have prompted at least a handful of global banks to ensure collaboration between the various units of their anti-financial crime function, including by establishing common case-tracking systems and reporting lines.

When not directly targeted themselves, financial institutions unwittingly become involved in lottery scams, business email compromises and elderly fraud when the perpetrators of those schemes rapidly scatter their profits through domestic and offshore accounts held by “money mules” and other intermediaries.

The emergence of increasingly sophisticated money-mule networks are among the principle drivers of banks’ efforts to formalize cooperation between their anti-fraud and anti-money laundering departments in recent months, Patricia Sullivan, a senior compliance officer for Standard Chartered Bank in New York, told ACAMS

“At least three banks officially brought the fraud risk-control area under the shared leadership of FCC [financial crimes compliance] in 2018,” Sullivan said. “It’s something we’re looking at.”

U.S. officials underscored the role money mules increasingly play in fraud last year and again last month, when federal prosecutors accused more than 260 suspects of bilking $750 million from hundreds of thousands of mainly elderly U.S. victims over a 20-year period.

An estimated 600 alleged mules used bank accounts and other financial channels to move proceeds from the various schemes targeted in the nationwide sweep, which eclipsed the Justice Department’s previous record takedown of elderly-abuse fraud, announced in February 2018.

Large financial institutions commonly task an entire division to protect sensitive banking and client data, a second to shield customers and the institution itself from fraud, and another to spot, report and combat attempts to launder funds stolen from the bank or derived from other crimes.

Under that common framework, the head of the anti-fraud unit typically reports to the bank’s chief operating officer while the head of anti-money laundering, or AML, answers to the chief compliance officer, according to Julie Conroy, a Boston-based research director for Aite Group.

But in the past two years, three of the 10 largest U.S. banks have tasked a senior vice president or other executive to supervise joint anti-fraud and AML investigations while also allowing for the units to screen transactions separately, Conroy said.

“Definitely efficiency is a driver, but also there are shared perpetrators,” she said. “‘Muling’ is a great example—you absolutely have a shared problem.”

Some banks have built common case-management systems to allow anti-fraud and AML staff to keep track of each other’s investigation, according to an AML compliance officer for a midsize lender on the East Coast.

A hypothetical attempt to log in to 20 U.S. accounts from the same overseas IP address may resemble a hacker stealing funds from legitimate clients, or look like a money launderer coordinating transactions to and from money-mule accounts.

“There’s a lot of cyber-enabled crime [and] I don’t think a lot of institutions have defined where that falls into,” said a second East Coast-based compliance officer for a large U.S. lender. “The difficult thing is if you kick it over to fraud and they say, ‘It isn’t fraud,’ then it dies there … and that happens quite a bit.”

Personnel decisions may also form an obstacle, sources said.

Anti-fraud units tend to be led by former law-enforcement officials and must act quickly and decisively to prevent losses, while AML staff primarily focus on complying with legal and regulatory requirements, and often work methodically and deliberately to determine whether a particular transaction merits a suspicious activity report, or SAR.

“As you break down those two disciplines, generally speaking … you’re talking about different skillsets,” said Frank Mayer, a former senior attorney for the Federal Deposit Insurance Corp.

Compliance officers at a Canadian lender and two midsize U.S. lenders—one on the East Coast and another in the Midwest—told that their institutions have discussed bringing their respective anti-fraud and AML functions under the same leadership, though neither anticipates a sizable restructuring soon.

Some have kept the various elements of their anti-financial crime function separate on the presumption that combining them may interfere with AML personnel’s primary mission of reporting suspicious transactions to the Treasury Department.

But AML units stand to gain the most from close cooperation with anti-fraud, according to the first East Coast-based compliance officer, because those combined efforts help them locate additional suspicious activity they otherwise may have missed.

Contact Daniel Bethencourt at

Topics : Anti-money laundering , Fraud
Source: U.S.: OCC
Document Date: March 21, 2019