Financial crime prevention: Credit provider's cutting-edge approaches

Credit providers understand the critical challenge with the rise of complex financial crimes, from cyber theft to money laundering. Criminals are using advanced technologies—the same ones that make digital banking possible—to break through security defences.

In response, credit providers are forced to constantly modernise their approach to crime prevention by replacing legacy systems with cutting-edge innovations. From AI to blockchain, leading lenders are implementing new strategies and technologies that set higher standards for security—while actively shaping safer lending.

In this blog, we’ll look at the techniques leading credit providers are using to guard against emerging threats and create a more secure future for themselves and their customers.

Let’s dive in. 👇

What’s driving increased financial crime?

Digital transformation in banking has enabled convenience and efficiency, but according to Comply Advantage’s The State of Financial Crime 2023, as technology evolves, fraud and scams do too—especially as economies worsen. 

Criminals are harnessing the anonymity of the online world to commit complex fake identity fraud, use fake videos and images to get past security, and transfer illegal money using digital currencies and online platforms. Meanwhile, cybercriminals are exploiting vulnerabilities in banking infrastructure to steal data and assets.

Ultimately, as financial crimes grow more advanced, traditionally reactive security measures are being outmatched. Credit providers are struggling to identify threats and stop attacks. Meanwhile, the European Union is preparing to roll out its most comprehensive anti-money laundering regulatory package ever.

How can firms effectively manage customer data, meet increasing regulatory expectations, and combat competitive pressures? 

Interestingly, there’s a growing recognition of the need to 'get the fundamentals right.' For credit risk teams, this means how their data and teams are structured. According to the above report, 39% of firms said digitally transforming legacy systems was their most significant compliance-related pain point, six percentage points higher than two years ago. 

The key is to be proactive and think ahead to predict emerging attack vectors and fraud tactics. It’s an ongoing battle.

Transforming legacy systems with emerging technologies  

In 2024, modernisation and digitisation of legacy systems is to be expected. Of course, adopting cutting-edge technologies not only creates smoother customer experiences but also equips lenders with state-of-the-art capabilities for combating fraud, money laundering, and cybercrime. 

Here’s a handful of the key technologies making strides in combating financial crime:

#1: Artificial Intelligence

One of the biggest reasons is that harnessing large-scale data analytics and self-learning models, like AI and machine learning, enables lenders to pinpoint suspicious activity in real time. By analysing transactional behaviours and immediately flagging anomalies, these intelligent systems allow you to stay steps ahead of even sophisticated fraud tactics.  

#2: Blockchain

Blockchain's strength lies in its ability to keep a safe, clear, and permanent record of all transactions, making it an essential tool. Its decentralised setup increases security by spreading data over many computers, which greatly reduces the chance of hackers getting into the system.

#3: Biometric authentication

Biometric authentication uses special features unique to each person, such as fingerprints, face, and eye patterns, to confirm who they are. This makes it much harder for someone to pretend to be you and gain access to your financial services, because these unique features are not easy to copy. By checking that only the right people can get into accounts and make transactions, credit providers can make their services safer and more secure for everyone.

#4: Multi bureau data 

While it’s not new, multi-bureau data offers something a standalone bureau feed doesn’t; data comprehensiveness. Multi-bureau scans the entire credit data universe to boost your pass rates and bring you more good customers. In fact, multi-bureau means more double credit header customer matches—the gold standard of KYC and AML checks. 

As these technologies continue advancing and reaching maturity, they are likely to play an even greater role in shaping security and protecting both lenders and end customers.

RegTech: Compliance innovation for the digital age

Firms have tried to force a square peg in a round hole for years by using legacy systems to prevent financial crime. But legacy systems weren’t built for today’s sophisticated financial crime. This is where RegTech can offer an innovative approach.  

Leveraging automation, AI, and real-time data, RegTech streamlines critical anti-money laundering (AML) and Know Your Customer (KYC) processes. And by instantly screening customers and continuously monitoring transactions, these solutions accelerate onboarding and reduce compliance risk through proactive threat identification.

So, instead of periodic, manual reviews, RegTech allows for constant, automated monitoring that immediately spots and alerts on any suspicious activities.

What’s more, RegTech removes the complexity of compliance reporting by organising the collection and submission of data to regulators. Reports are generated instantly—freeing up credit providers to focus on higher-risk areas.

Put simply, RegTech equips lenders to embed compliance into every customer interaction and transaction, creating an audit trail for responsiveness. Far more agile than legacy methods, these regulatory technologies assure detection and transparency.

Navigating challenges in adopting crime prevention tech 

Of course, it’s not as simple as it sounds. While advanced technologies offer enhanced financial crime detection, credit providers pursuing cutting-edge solutions face multiple hurdles:

Data privacy 🔒

Strict data protection laws rightly govern lenders' use of customer information, bringing public scrutiny on technologies like AI and biometrics that rely heavily on analysing personal data. Credit providers must navigate complex questions around consent, access rights, data management transparency and accountability.

Substantial costs 💸

Additionally, small and mid-sized institutions especially, may struggle with the sizable capital investments needed to develop and integrate the latest security systems based on blockchain, machine learning algorithms and more. With ongoing staff training and solution maintenance costs added in, only credit providers with deep pockets can pursue full-scale technological upgrades.

Balancing automation with human insight ⚖

However, even well-funded credit providers need to be careful not to depend too much on technology alone. While machines are quick to spot when something doesn't match the usual pattern, they're not good at understanding the subtle details or adapting to new types of threats. So, while using automated systems, trusted fraud and security experts still need to check results and make final risk assessments. 

By paying close attention to privacy, budget, and management issues related to technology for fighting financial crime, banks can create smart and forward-thinking plans. These plans keep a good balance between earning their customers' trust and making sure the credit provider stays strong and secure.

Closing the innovation gap in fighting financial crime 

To wrap it up, tackling financial crime today requires credit providers to continue bridging the gap between legacy systems and emerging technologies. After all, criminals are leveraging the latest tech for attacks.

With new tools like AI for stopping fraud, banks can now spot and stop fraud instantly before it gets worse. Blockchain makes it easier to see through complex transactions to find any criminal activity. Also, biometrics, like fingerprints and face scans, make it much clearer who is who, helping to prevent identity theft.

Despite all this, there are challenges around data privacy, costs and oversight. So, it’s essential that credit providers responsibly build advanced capabilities while respecting customer consent—carefully considering investment trade-offs, and balancing automation with human expertise.

The key takeaway? While it may seem a lot to take on, opportunity is abundant. By strategically modernising fraud and security processes, credit providers can boost consumer trust. But success hinges on quick adoption of the most credible emerging innovations.