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Fighting financial crime is costly but worth every penny

HSBC spends a fortune in new technologies that will help thwart fraud and scams as it bids to become an industry leader in risk management

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Nearly half of the world’s biggest firms have been victims of fraud, theft or money laundering. To help thwart would-be criminals, HSBC has spent over $1 billion on IT systems alone.
Gulf News

Dubai: Fighting financial crimes is emerging as a huge concern for financial institutions and businesses as large numbers of business entities are falling victims every year, Colin Bell, group head of Financial Crime Risk at HSBC, told Gulf News in an interview.

Nearly half of world’s large corporations have been the victims of fraud, theft, money laundering or other forms of financial crime, according to a recent survey by Thomson Reuters.

The companies surveyed estimated a total aggregated loss of $1.45 trillion (Dh5.32 trillion), or around 3.5 per cent of their global turnover.

 We have set ourselves the bold ambition of becoming an industry leader in financial crime risk management. And that’s why we are already taking the next steps to develop an intelligence-led approach through increasing our ability to interrogate and analyse data.”

 - Colin Bell (left) | HSBC’s group head of Financial Crime Risk 


Although banks and financial institutions have made significant investments in fighting financial crimes, Bell said the industry has a long way to go in achieving its goals.

“There is a general recognition amongst both banks and regulators that the current approach across the banking sector has to be improved. Banks collectively are spending huge sums on tackling financial crime, but the impact in terms of illicit funds is seized is still tiny — it’s estimated that not even 1 per cent of the criminal funds flowing through the international financial system each year are confiscated by law enforcement,” said Bell.

Being a financial institution with global footprint and being at the heart of global trade, HSBC spends substantial resources in dealing with financial crimes.

Over the last five years HSBC has made huge investments, both in people and the infrastructure that supports them, in order to raise capabilities across the bank. In that time, the number of staff working to thwart financial crimes has grown five-fold and the bank has spent over $1 billion on IT systems alone.

“We have set ourselves the bold ambition of becoming an industry leader in financial crime risk management. And that’s why we are already taking the next steps to develop an intelligence-led approach through increasing our ability to interrogate and analyse data. We are also seeking to work in partnership with other banks, regulators and law enforcement,” Bell said.

While financial institutions focus on the external risk of fraud and scams, there are a lot of issues relating to fraud originating from within organisations — starting from poor employee integrity, market abuse, bribery and internal corruption.

HSBC as an organisation has been building a range of controls internally to prevent such failures.

“At HSBC we have extensive mandatory training in place for staff. It is important that they can recognise the risks and the warning signs and also that they know what to do, should they be confronted with such a risk. But more importantly, we have focused on promoting what we call a ‘speak up’ culture within the bank, where colleagues are encouraged to speak up when they see something that doesn’t feel right. If they cannot do that openly, then we have a whistle-blowing line in place for them to do so,” he said.

Hi-tech crimes

With the use of technology in financial services, cybercrimes and financial crimes are increasingly converging. New technologies give criminals new opportunities to commit crimes and launder their criminal proceeds.

“They [criminals] are every bit as good at adapting to new technology and as innovative as commercial organisations. And, of course, they have the huge advantage of being able to operate without paying attention to laws, international boundaries or the many other requirements that legitimate businesses face,” Bell said.

While new technologies can create opportunities for criminals, organisations like HSBC are also making huge strides in the way that technology helps theme to protect its customers.

Some of these will be apparent to customers — such as fingerprint identification on their mobile phones providing access to their accounts. The Emirates ID is an excellent example of how technology can make people more secure.

‘Behind the scenes we are working with, and investing in, a range of new technologies or ‘fintech’ firms to develop solutions that will enable us to become far better at detecting suspicious transactions. Emerging technology such as Artificial Intelligence (AI) and machine learning are helping us to become far smarter at spotting areas of interest in the huge volumes of data that we hold,” Bell said.

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