Financial crime is not a recent concept, it is the feature since the concept of money developed. The unfamiliar thing to know about financial crime is nowadays it occurs through technology. It defines financial crime as a crime which is committed against property or money personally to benefit the criminal by transferring ownership of the property through illegal means. These crimes are increasing all over the world and various countries are in search of the methods of reducing the same. Every year, an estimated $2.4 trillion proceeds from activities such as forced prostitution, terrorism, and drug trafficking are laundered through the world’s financial markets and banking systems. Technology can harm the financial system but, it can save by using it against these crimes. It is a crime that we all interact with every day without noticing.
Types of Financial Crimes
Bribery is defined as offering or accepting desirable value in exchange of getting something in return. It may take the form of gifts or payments of money in exchange of favorable treatment. It is an illegal way of gifting or exchanging money for owns profit. Bribery is one of the major reason of increase in corruption.
Fraud is an intentional deceptive action for monetary or personal gain. Fraud takes place through false statement, misinterpretation or deceitful conduct. It may occur in finance, investment or insurance, real estate, sale of land or personal property etc. Fraud is an offence which comes under both criminal and civil laws.
- Electronic crime
Any criminal act that involves use of technology/computer to transfer money or funds from one account to another or staling or erasing the data from an electronic data bank is known as electronic crime. This act may threaten a person or his data or damage any nation’s security and financial health.
- Money laundering
It is a illegal activity of making large amounts of money which is generated by criminal activity such as terrorist funding, drug trafficking, forced prostitution etc. This money achieved through illegal means is laundered to use it legally and the process is called money laundering. This is a serious financial crime that is committed by street criminals as well as white-collar people.
- Terrorist financing
Terrorist financing is a act of providing funds and financial support to terrorists or non-state actors who work against the state. Money laundering is sometimes used for terrorist financing. Money laundering and terrorist financing are sometimes considered as similar but there is a huge difference between the two. Money laundering involves illegal way for monetary profit whereas terrorist financing not necessarily use illegal way for profit and funding.
- Market abuse and insider dealer
Market abuse is basically market manipulation and unlawful disclosure. Insider dealing and unlawful disclosure both includes misuse of insider information and also involves dishonest or artificial manipulation of market. The use of insider information to gain or give an unfair advantage on the securities market is known as insider dealing.
- Identity theft
Identity theft is a wrongful act of using someone’s personal data using fraud or deception, for personal/economic gain. It involves theft of personal documents showing date of birth, address, credit card details etc. This may take place through technology. Identity theft often occurs without the knowledge of victim unlike robbery. Stealing fingerprints is also considered as identity theft.
Reasons behind the Financial Crimes
Technology was created for making human life easier and better but criminals are using technology for their purpose making it a dangerous zone of crime. With the development of technology criminals are finding innovative ways to exploit new technologies to clean their dirty money. Money laundering, identity theft, electronic crime, fraud all these are mostly occurring through technology or electronic devices. In today’s world people give huge importance to social media. We make a mistake of sharing our personal information on our social media like sharing pictures of new sports car or many other expensive things. Criminals keep check on such information and commits crime. These days phone and email scams are increasing. Fake calls for tracking personal details by the criminals.
- Big data
In the era of globalization, big data gets a lot of attention. It helps in businesses, economic growth and details of sharing borders etc. As it makes human work easier to store and share, it is equally dangerous to get into the wrong hands. This big data can be hacked using advanced technology which can be further used against any business or damage the safety of nation.
- Lack of good governance
Good governance includes accountability, rule of law, avoidance of corruption and strong regulation. If one of these indicators fails, financial crimes like money laundering or terrorist financing are likely to occur. Good governance should be effective and efficient, rules should be strict so as there must be fear of punishment for such crimes.
- Lack of transparency
Some organizations or companies fails to promote good practices and value. Failing in accountability and transparency leads to financial crimes. In these cases, employee of the company may look to launder money of the company for his own profit. Transparency is must for running a company or organization smoothly. It creates a trustworthy relationships between employee and the company.
Approximately 36% of senior corporate executive believes that the general rate of fraud has increased because of the recession. Recession in simple terms is a period declining economic performance across an entire economy that lasts for several months. Financial crimes keep rising if there is high rate of unemployment. Many financial services firms say that they have observed that employee fraud has been increasing during the recession period.
- Improving cross-border and domestic information sharing
Domestic and cross-border information of any country is very important as well as risky at the same time. All the important information like economic data, geographical data, legal frameworks etc. can be used against a nation by financial criminals or terrorists. By improving the exchange methods of such information, financial crimes can be reduced at a level.
- Advancing Public-Private Partnerships (PPPs)
The Public-Private Partnership is a collaboration between financial institutions, law enforcement, policy makers and the regulatory community to overcome the problem of financial crime. PPPs present a unique opportunity to help ensure that the right information and intelligence is available to those within the financial crime compliance framework who are most able to use it to drive better outcomes. Regulators and policymakers have a vital role to play in the development of PPPs.
- Increasing and improving the use of technology
New technologies have helped financial institutions, companies and organizations in many ways. But it has also became a major cause of financial crime. One can say that adopting advance technologies may expand risk of financial crimes. Improving these technologies in a way that data can be kept safe, may reduce financial crimes at some extent.
- Global systemic improvements for financial crime risk management
The effective and coherent application of global standards is one of the primary means by which it can safeguard the financial system, and their attempts can stop criminals to profit from their crimes.
Financial crimes, if taken proper majors can be reduced or controlled. Technology is the major cause of the rise in financial crime. Lessons about how to use technology efficiently safely should be given to the public. We should hide personal information from unknown people. Financial crime is a crime that is sometimes doesn’t come into the knowledge of the victim easily. There must be strict provisions regarding such crimes. Many financial firms and companies do not share or complain about such crimes just for the sake of the reputation in the finance market which gives more confidence to such criminals. These crimes must be reported so that the investigation can proceed against such criminals. Fraud and money laundering are the financial crimes that are most commonly used for personal profit. They need more security for personal data available online and offline in the form of paper documents. Technology is the key that can be used against financial crimes.
- What is financial crime?
we define Financial crime as a crime which is committed against property or money, personally to benefit the criminal by transferring ownership of the property through illegal means.
2. What are the types of Financial Crimes?
- Electronic Crime
- Money Laundering
- Identity Theft
3. What are the preventive measures which should be taken against Financial Crimes?
- Improving Cross-border and domestic information sharing.
- Advancing Public-Private Partnership
- Improving and Increasing the use of technology
- Global systematic improvements for financial crime risk managment.
- Aparicio, Miren B., et al. Big Data: Mitigating Financial Crime Risk. Atlantic Council, 2017, pp. 53–79, BIG DATA: A Twenty-First Century Arms Race, www.jstor.org/stable/resrep03719.9. Accessed 28 June 2020.