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Understanding the Fight Against Financial Crimes

Blog Post
2 min read
a magnifying glass looking over paperwork

Financial scams are never-ending. At least it can seem that way, as fresh reports of individuals losing money to various fraud schemes appear in your newsfeed daily. While some crooks get away with emptying bank accounts and selling stolen personal information on the dark web, many consumers are unaware of the ongoing battle against financial crimes.

What Is a Financial Crime?

A financial crime is an illegal activity that involves money. It can take many forms, with money laundering, identity theft, and fraud being some of the most common. Crooks may actively participate in such offenses or enlist unsuspecting targets to aid in the unlawful conduct.

Here’s a closer look at the three examples mentioned above:

1.    Money laundering uses deceptive techniques to transfer funds between financial systems. Bad actors use everyday scams to entice money mules, people who receive a commission or other monetary benefit for helping with a bank transaction, to disguise the proceeds of illegal activity by funneling funds through legitimate institutions.

For example, a mule might receive a request to use their bank account or open a new account to send or receive money on behalf of someone else. Even if the mule is unaware of the criminal intent, they could still suffer serious consequences for participating in the scheme.

2.    Identity theft occurs when someone steals personally identifiable information for financial gain. Full names, dates of birth, and Social Security numbers belonging to one person can be used to open up numerous financial accounts or make withdrawals from existing ones.

3.    Fraud covers a wide range of deceptive financial crimes, including identity theft. Other forms of fraud often involve at least two parties. Some schemes encourage someone to make false claims to access money they are not entitled to receive. Aiming to get a piece of the payout, scammers convince the target to make false claims on a tax return or to an insurance company, hoping it will lead to a big payday. It could also lead to jail.

What Are Financial Institutions Doing to Combat These Crimes?

Banks and credit unions have a responsibility to help stop financial crimes by putting anti-money laundering programs into practice. They must also have internal controls to help detect and prevent other forms of fraud. Taking a proactive approach to uncovering financial fraud is crucial to protecting the institutions’ members.

For example, credit unions use automated tracking systems and transaction monitoring rules to help identify unusual account activity. United States-issued debit or credit cards used in other countries, cross-border wire transfers, and high-volume transactions are a few examples of behaviors that might trigger an alert for trained credit union fraud investigators.

In-person identification requirements, online passwords, and two-factor authentication are more ways financial institutions help guard against financial crimes. Plus, many financial institutions provide free financial education on such topics so individuals can steer clear of criminal attempts from strangers as well as people they might already know.

How Can I Protect Myself From Financial Crimes?

Awareness is key to protecting yourself from financial crimes. Monitor your credit reports and bank accounts regularly and report suspicious activity to your financial institution and law enforcement. Join us in the fight against financial crimes by reviewing SAFE’s financial security safety guides. They provide additional information on how to thwart attempts by bad actors.