Man with surgical mask on shopping on his laptop with a white background juxtaposed with criminal online shopping in the dark with a purple background

Feedzai’s latest Financial Crime Report illustrates why 2020 was the best of times — if you’re a fraudster. For the rest of us, it was the worst of times. The tale of two pandemics is one of fraudsters rejoicing at the rapid shift to digital banking and commerce, and one of consumers getting swindled by purchase, impersonation, money mule schemes, and account takeover (ATO) scams. Read on to discover how we used our exclusive data from over 11 billion transactions to glean insights for fraud and anti-money laundering trends impacting financial institutions today.

Financial Crime: A Tale of Two Pandemics

A look at billions of global financial transactions makes one thing clear: 2020 was a year of two pandemics. For many of us, the pandemic resulted in lockdowns, social distancing, and adjusting to working from home 24/7. It also meant a massive shift to digital banking and eCommerce – and numerous threats of getting scammed, defrauded, roped into money mule schemes, and more.

For fraudsters, a very different pandemic was underway. In this pandemic, bad actors gleefully benefited from a wide range of scams and digital rackets aimed at exploiting mass confusion and defrauding unsuspecting consumers, merchants, and organizations. What’s more, as the pandemic drove millions of new consumers to embrace digital banking technologies last year, fraudsters were eager to go along for the ride.

Fraudster Favor ATO Attacks

As fraudsters infiltrated the digital banking landscape, they were eager to take advantage of new real-time transfer capabilities available at many financial institutions (FIs). Unfortunately, the transfer capabilities made it easier for fraudsters to move money rapidly and fuel a 650% rise in account takeover ATO scams in Q4.

ATO attacks aren’t the only tool available to fraudsters. The Financial Crime Report outlines the top five fraud schemes that attracted fraudsters more than any other:

  1. Impersonation Scams
  2. Purchase Scams
  3. ATO Scams
  4. Investment Scams
  5. Romance Scams

CNP fraud surge

Fraudsters also took advantage of the increase in eCommerce activities as consumers shopped more online. Card-not-present (CNP) fraud transactions, in which fraudsters use stolen credit card credentials to make purchases they have no intention of paying for, accounted for 70% of fraud attacks. Unfortunately, by the time most victims became aware of the problem, the fraudsters had moved on to their next target. Fortunately, banks can use machine learning and two-factor authentication (2FA) solutions to help thwart fraudsters’ CNP efforts.

New financial crime risks

In addition to financial services crimes, the massive shift to digital banking channels opens new opportunities for criminals to launder money by pushing money mule schemes. High unemployment rates, concerns over eviction, and widespread economic anxiety made it easier for criminals to recruit individuals into money mule activities, both knowingly and unknowingly. The FBI took steps against 2,300 money mules last year, an increase of 383% from 2019.

FIs need strong anti-money laundering (AML) risk management solutions to detect and stop money mule activities and the money laundering organizations behind them. But just because they get an AML alert doesn’t necessarily mean that there is a crime. That’s why FIs need their AML compliance solutions to include risk management, set alerts appropriately, and help their AML compliance teams focus on legitimate threats. Several triggered AML alerts – out of five – indicate that suspicious activity deserves further scrutiny.

The five AML alerts for FIs to monitor include:

  1. Rapid Movement of Funds
  2. Transactions in Same or Similar Amounts
  3. High-Risk Geography
  4. Activity in Dormant Account
  5. Transactions in Round Amounts

Money mules, ATO attacks, and CNP fraud transactions were among the most significant fraud activities in 2020 and give a glimpse into the state of financial crime in 2021.

Want more details on the financial crime landscape, including fraud attacks by industry and global region? Download Feedzai’s Q1 2021 Financial Crime Report to gain detailed fraud and financial crime insights from over 11 billion financial transactions worldwide.