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Education

Tightening payment For retail banks, payments fraud impacts both consumers
and the banks' bottom line. The Association for Financial
security in real-time Professionals' latest Payments Fraud and Control Survey,
underwritten by J.P. Morgan, found 71 percent of financial
professionals reported their organizations were victims of
with EDA payments fraud.

Not only do fraudulent payments negatively impact
banking customer experience and confidence, the
cumulative cost is also large: Juniper Research recently
warned that online payment fraud losses alone will
globally reach $343 billion between 2023 and 2027 (https://
tinyurl.com/48vt3c4e).
Money laundering and organized crime

Money laundering is a major threat for banks because it
usually goes hand in hand with serious organized crime,
including drug or people trafficking, weapons dealing,
and even terrorism.
By Mat Hobbis
Solace The estimated amount of money laundered globally is
between 2 and 5 percent of global GDP (https://tinyurl.
he number of payment channels has grown com/3m93xnuu) and the reputational damage of undetected
exponentially. The time it takes to settle a money laundering can be catastrophic.
transaction has gone down from days to min-
T utes—which could now be seconds as I write. The Bank for International Settlements (https://tinyurl.
Of course, some older channels, such as direct debits and com/3m93xnuu) explained that “spotting different money
check deposits, remain. laundering patterns is complex, requiring different data
points and data sources as well as the ability to connect
Traditional banks have had to move from a couple of them across different systems in order to better identify
channels to potentially 10 to 15 within their organization. suspicious flows and patterns.”
The more channels, the more vulnerable the system
becomes to fraudsters and criminals. The two big Technology and EDA—a software design pattern in which
challenges for financial institutions (FIs) now are payments decoupled applications can asynchronously publish and
fraud perpetrated by consumers and organizational subscribe to events via a middleman known as an event
money laundering. broker—can help address these growing criminal threats
in three key areas:
Here’s the conundrum. Modern financial organizations
must mitigate against such criminal activity for the safety 1. Detection: Banking and payments organizations
of their users and their own reputations. But they must must quickly identify and address fraudulent or
do this without adding friction into the payments process criminal transactions across all channels.
that would put off or dissuade their customers.
2. Real-time action: The challenge for organizations
They need a solution that can keep pace while carrying is feeding transaction data, in real-time, to AI /ML
out additional checks in real-time across systems that processes, which often live in the public cloud.
often encompass legacy, on-premises deployments, as 3. Keeping one step ahead: To outpace fraudsters
well as modern container deployments, and public cloud and criminal enterprises, FIs need flexibility in
for artificial intelligence (AI) and machine learning (ML) how software components are wired together and
capabilities. In today's world, this means using the new flexibility in where they are located.
generation of event-driven architecture (EDA).
Building a model
The more channels, the more opportunities fraud
The sort of activities that go into building a fraud
In a recent article series (https://tinyurl.com/3rnp8n9k), prevention or anti-money laundering (AML) model with
McKinsey wrote, “Skyrocketing levels of fraud, enabled setting trigger points would include: type of transaction
by the accelerated adoption of digital commerce and versus consumer behaviors, including whether a
the ever-increasing sophistication of fraudsters, have transaction is consistent with a customer’s previous
overwhelmed traditional controls in recent years. This transaction history, takes place in an expected geography,
surge has led to increased fraud losses and damaged and whether time and distance between the most recent
customers’ experience and trust.”
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