Trafficking and terrorist financing – outsmarting criminals with adaptive intelligence

Tuesday 18 August 2020 10:55 CET | Editor: Anda Kania | Interview

Araliya Sammé, Featurespace: Modern technologies such as AI and machine learning enable a more efficient approach in detecting criminal behaviour, helping investigators better understand the ever-evolving money laundering techniques and detect patterns early on

As you explained in the webinar you held in June, detecting financial crime typologies like human trafficking and terrorist financing are a vital part of AML compliance. How would you describe the current realities of this field, especially from the standpoint of a financial crime expert? What do industry experts, tech providers, but also the general public need to know more in depth about the topic?

Above all, this topic encompasses an incredibly complex and ever-evolving set of issues. Criminals’ strategies are becoming more sophisticated, as they deploy refined techniques to serve their illicit interests and to further develop their own business models. The International Labour Organization estimates that 40.3 million people are trapped in modern slavery worldwide, of which over 20 million are victims of forced labour. The organisation further presents a disturbing reality: 4.8 million people are subjected to sexual exploitation and approximately one in five victims are children.

What’s more, terrorism and human trafficking are completely intertwined with our regular economy, but are two very different challenges to mitigate. For governments, law enforcement agencies and tech organisations, identifying and mitigating the inner workings of a trafficking organisation are becoming greater challenges because criminals manage to implement intelligent techniques to effectively legitimize their money to further fund illegal activities. This is an area gaining more and more attention in the industry and it has commended tremendous investments for financial institutions to tackle these criminal activities internally.

How has the COVID-19 pandemic impacted this reality?

We have seen an exhibition of activities from traffickers and terrorist organisations since the world entered the pandemic and there are various reasons for this. Firstly, during times of crisis, we see a significant increase in criminal activities and the diverted attention of governments often leads to more opportunities for criminals to take advantage of loopholes and fly under the radar. Secondly, the restrictions on travel and free movement of people and capital prompt criminals to innovate their money laundering techniques.

In addition, from an economical perspective, a rising unemployment rate leads people into exploring new ways of generating more income and criminals are exploiting their vulnerabilities as well. 

At a national level, the UK and countries similar to it are forced to rethink their budget for the public sector and support businesses – this is where a greater need for private sector support and capital is required and we have a major role to play in this.

What is being done to detect and prevent these activities, including but not limited to tech advancements? How is the financial services industry contributing to fighting against these issues?

The collaboration between the private sector, public sector, and government entities is key – effective communication and intelligence sharing are paramount if we are to successfully combat the prevalence of terrorism and human trafficking activities.

Several great initiatives and events serve as catalysts for collaborations between all the sectors. There is the Joint Money Laundering Intelligence Taskforce, which enables banks and governments to join forces to share intelligence with regards to some of these criminal activities that have been detected for further investigation and combat. There are also other bodies that organise events to raise awareness of the financial crimes’ issues and their implications.

As well, training and engagement with the frontline staff from financial institutions are crucial in tackling these risks. The frontline staff serves tremendous value in gathering intelligence for senior level decision making processes. This intelligence can be shared with legal entities and other financial institutions, and the acquired knowledge can be transformed into more tangible controls. This is more of a challenge in risk management for terrorist financing and it's tougher to proactively address.

The industry is also seeing a vision of institutions’ risk assessment from the top-down, driving real changes in banks' control systems. The better they understand the risk, the better they can put the right controls in place, either automated or manual. Moreover, the recent enhancements in Know Your Customer initiatives expand the details of these risk assessments, providing banks with a higher level of information about their customers and therefore helping them understand the inherent and residual risk that they are exposed to.

What do AML and financial crime experts need to consider when debating how to better detect the behavioural typologies involved?

Modern technologies such as AI and machine learning enable a more efficient approach in detecting the criminal behaviour, helping investigators better understand the ever-evolving laundering techniques and detect patterns early on. Banks and financial institutions rely on a powerful combination of technology and expertise – experts within the banks and subject matter experts in financial crime within technology companies.

It’s also crucial to consider that criminals are smart and have their own capital and technology resources. In order to stay ahead of them, the industry must  use the right technology with predictive tools.

In the grand scheme of things, capital fuels illicit activities. Many terrorist attacks don’t involve high costs, so criminal organisations don’t need to launder enormous amounts of money to fund them. If governments and private sector entities could better detect and or stop even the small funds fed and generated by trafficking and terrorist financing, these criminal organisations may be unable to survive.

We have also noticed that banks and financial institutions often emulate each other in their approach to fighting financial crime. For this reason, it’s key to reiterate that solutions tailored to their needs deliver the benefits everybody is looking for to make the world a better place.

Where does Featurespace come into place? Can you share with us some of the inner workings of the company’s tools used to predict, prevent and manage the fraud and financial crimes revolving around trafficking?

Here at Featurespace, we start with a base product philosophy, which implies understanding the good behaviour first. It’s very important to know that good behaviour rarely changes, or it changes at a much slower rate than bad behaviour, especially when it comes to transactions and spending habits.

Traditional technology systems constantly seek to identify bad behaviour and look for known red flags, creating blind spots that make the fight against fraud and risk an expensive, uphill battle. Today, financial institutions are keen to understand the existing risks and surface the unknown new threats, which is exactly how our company assists. We bring our own support to the investigative processes within banks and apply machine learning based Adaptive Behavioral Analytics, risk scoring and network analytics to accurately spot both known and unknown risks.

Featurespace’s formula for success is comprised of an experienced team of data scientists, subject matter experts and machine learning technologists. Data science coming out of our AI labs creates a formidable force against criminal activity. For our financial institution partners, we enable the technology to ensure they spot the maximum amount of suspicious funds in their system.

What are some predictions that you can make when it comes to both the technology and regulation supporting this fight and the upturn that the current efforts can create?

Investments in technological innovation, especially in the AI and machine learning space, are likely to accelerate to create an enhanced and more risk-tailored solution set for the financial services industry. As we serve a large influence over business decision making, we can foresee greater cross-industry collaborations and initiatives between regulators, public entities and private institutions, including at national levels.

The industry should also pursue a better translation of gathered intelligence into tangible controls. Holistic monitoring is the new driving force for accurate detection and prevention of known and unknown threats, and it requires banks to update and optimize their controls. A technology that automatically adapts and understands the changing behaviour and context is the answer to financial institutions’ financial crime challenges.

About Arailya Sammé

Araliya joined Featurespace in 2016, bringing deep subject matter expertise in all areas of Financial Crime to Featurespace customers and finance industry conferences around the world. Prior to joining Featurespace, Araliya worked as a management consultant at both Deloitte and EY (Ernst and Young) and advised at multiple global financial institutions on Financial Crime and Anti-Money Laundering.


About Featurespace

With offices in Atlanta, Cambridge and London and customers in more than 180 countries, Featurespace is the world-leader in fraud and financial crime prevention. Featurespace’s ARIC™ platform is a machine-learning software that combines adaptive behavioral analytics and anomaly detection to identify risk and catch suspicious activity before it happens.

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Keywords: Featurespace, financial crime, terrorist financing, machine learning, behavioural analytics
Categories: Fraud & Financial Crime
Countries: World
This article is part of category

Fraud & Financial Crime