5 million euro losses were registered in Lithuania due to fraud, in the first part of 2021, according to Lithuanian Banking Association. Cybercriminals are getting more active targeting private citizens as well as business entities – the number of fraud investigations has increased by about 25 percent during recent years, according to Swedbank. The bank’s data show that the average loss from fraud incurred to individuals is around 2 thousand EUR while in the case of business entities it amounts to 25 thousand EUR and can reach up to hundreds of thousand EUR. With more people and businesses moving online, financial crimes like fraud and money laundering increase. Banks and other financial institutions try to find solutions in unity and technologies to fight rapidly developing crimes.
The danger of financial crimes and main fraud trends
Fraud and money laundering crimes are advancing rapidly. Fraudsters build large networks to target their victims, use technologies to simulate banks and other financial institutions. According to Linas Sadeckas, Fraud Prevention Expert at Luminor Bank, criminals evolve together with the latest security technologies. “Ten, fifteen years ago, you would receive a cold call from someone in prison. Now, fraudsters have call centers operating 24/7. They are calling everyone, impersonating banks and their employees.”
New fraud schemes are also trending. Mr. Sadeckas shared that fake invoices, investment, romance, phishing, phone, and advance payment fraud cases are more prevalent than ever. He explained that an increase in criminal activity could be linked to two factors - people are more willing to report crimes, and the COVID-19 pandemic is pushing the world to move online.
Eimantas Vytuvis, CEO at Centre of Excellence in Anti-Money Laundering, seconded these trends and added that there are more drivers in this increase. The pandemic caused many people to lose financial stability, urging people to look for ways to earn money online or invest, and fraudsters use this as an opportunity to benefit from inexperienced victims.
Another driver for fraud is instant payments, he explained. “Before you had at least a few hours before the money reached the receiving account. Now, it goes instantly, and when dealing with fraud cases, time is crucial. Fraudsters use technology for their advantage, so we should also use financial technology to fight them.”
However, Andrius Merkelis, Fintech Hub LT Expert of Association, thinks that the COVID-19 pandemic was only an accelerator to digitalizing money and financial procedures, which was unavoidable. But he added that it’s not necessarily a bad thing because tracing digital payments is easier, and there’s more hope they will be returned to the victim while getting back payments in cash can be a mission impossible.
However, technology alone can’t shield financial institutions from fraud. Collaboration and information exchange together with technologies are much more effective in fighting financial fraud. „Reducing the risk of financial crime is our ultimate goal. That would not be possible without effective information sharing and a collaborative approach. We see the need to gather all the sectors and experts together to share their experience and expertise in fighting financial crimes”, said – Eimantas Vytuvis on why collaboration is key to successful fraud prevention.
Baltic state collaboration could lead the way in the fight against financial fraud
The Center of Excellence in Anti-Money Laundering presented one of the best examples of how public and private sector collaboration and information sharing helped tackle increased phone scam cases.
“Our team took the lead and gathered all market participants involved in the financial crime prevention. We have agreed that banks will implement an additional button to help customers report crimes even faster. Based on the analysis and our daily cooperation, an intensive preventive media campaign has been launched and initiated by all relevant parties. Our campaign’s goal was to target and prevent people from falling victim. This exchange of information and close collaboration between public and private sectors resulted in a drastic decrease of phone scam activity in Lithuania,” explained Elčin Mamedov, Coordinator at AML Centre of Excellence.
However, there are still many obstacles crippling effective collaboration. Taavi Tamkivi, CEO at Salv, exposed a problem that hinders banks in the fight against crime: the lack of cross-border cooperation. “Imagine if Baltic countries worked together and what we could achieve. Because criminals don’t stop at the borders, they work in networks. And when we are not able to share intelligence, we can’t stop crimes from happening. We have solved fincrime information sharing for Estonian banks, but we need to build a regional network, starting here in Baltics, we could be a regional leader in fincrime prevention.”
Andrius Merkelis added that data sharing between countries, banks, and other related institutions has to be instant because cybercrime is time-sensitive. However, data sharing and information exchange laws often put a spoke in the wheels when fighting fraud.
The lack of AML experts hinders the fight against financial fraud
Reda Stanytė, Head of AML Division at The Bank of Lithuania, explained that banks and financial institutions must embrace a compliance culture to achieve well-functioning joint work. “If the top management isn’t aware of risks or able to identify them, it’s impossible to move on effectively. But if you have a compliance mindset, it will be easier to dedicate resources to growing competence to be one step ahead of the criminals.”
In order to grow competence for compliance culture to work, it has to be constructed with trained professionals. And according to Mr. Vytuvis, Lithuania needs AML officers but lacks training centers to prepare them. “We have big competent centers like Danske Bank, Western Union, and they all need AML officers, but we don’t have any training system. And this is where we’re missing a piece of a puzzle.”
Instant data sharing and cross-border information exchange are the way to fight against financial crimes. On top of that, we shouldn’t forget the importance of educating the general audience about fraud and how to recognize it. You can learn more about actions against fraud in the FinCrime Experts Meetup @ROCKIT: Fighting Fraud Through Technology and Collaboration discussion here.
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