More Uses for GenAI in FinCrime Investigations

 

Building on my previous post: 3 Ways Generative AI Can Help with Financial Crimes Investigations we'll explore three more ways GenAI can be useful in FinCrime Investigations:

This technology is here to stay and it should be made good use of!

1. Enhanced transaction monitoring: By using Generative AI more sophisticated, beneficial and adaptive transaction monitoring systems can be created. These systems can learn from past incidents and continuously update their criteria to detect new and evolving financial crime patterns in real-time. While this technology is currently in use, GenAI can be leveraged to make it even more efficient.

2. Synthetic data generation: AI can generate synthetic financial datasets that mimic real-world scenarios. How cool is that? This allows investigators and analysts to train on diverse, complex scenarios without compromising sensitive customer data. Investigators and analysts will be more protected from being able to damage evidence, inadvertently or on purpose.

3. Automated report generation: Reports are always fun, no? AI can compile and summarize investigation findings into coherent, standardized reports. This saves time for investigators and ensures consistency in documentation across cases. Always remember: AI is there to give you the answers you want, not necessarily the truth. GenAI is an excellent summarization and re-wording tool.

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3 Biggest Problems Faced When Considering Evidence

   

I have been working financial crimes and cyber investigations for over 20 years.

Since starting as a computer geek and working my way up to financial crimes investigations, I have learned a lot about what it takes to solve some of the biggest problems people face in our industry. In fact, they are a lot easier to solve than most people think. You just need to change how you're thinking about them.

Here they are (in a nutshell), and how to solve them:

#1: Not following applicable laws: How to solve it: Investigators must thoroughly familiarize themselves with applicable laws, particularly the Rules of Evidence. These crucial regulations, typically adopted by statute, are codified into formal legal documents that guide investigative procedures and admissibility of evidence.

#2: Not authenticating your evidence: How to solve it: Authenticating evidence typically requires witness testimony. For digital evidence, this may involve a witness with personal knowledge of the item in question. For example, someone who shared a computer with the accused and directly observed the relevant document or file on that device could serve as an authenticating witness.

#3: Not defining your evidence: How to solve it: Learn how to define the different types of evidence. Evidence in investigations can be both digital and physical, and it's often the combination and correlation of different types of evidence that builds a strong case.

See? That wasn't so hard.

Obviously, these are very surface samples of what problems can be faced when considering evidence. Keep tuned for future posts that will help elaborate on these critical issues regarding evidence.

I'd love to hear your viewpoints!

#fincrime #investigations #financialcrime #banks #cybersecurity #evidence #court #witnesses #documentation #authentication #laws #jurisdictions

3 Ways to Tank Your Growing Business - And How to Avoid It

Mistake #1: No Policies & Procedures - Why this can lead to misconduct

Someone just microwaved fish in the lunch room. Lucy in the mail room is using her personal email address for business. Jack just installed some software on his station to work from home. It's absolutely amazing how many businesses I have come across that are in the process of growing and expanding, yet have never considered policies and procedures to be important. Policies are good practice guidelines that you and your employees should follow on a daily basis. There should also be a formal process in place for employees to sign and agree to the terms of the policies. Procedures are things that you do on a daily basis, but are documented so they can be replicated if needed by a new employee. Policies and procedures set clear expectations for employee behavior and job performance. They provide guidance on how to handle various situations, which can improve decision-making and reduce confusion or conflicts in the workplace.

Mistake #2: No Disaster Recovery or Incident Response - Why this can lead to legal risks

Hackers are knocking at your door. Your network is under siege. You never saw this coming. That is the failure of not having a good incident response plan in place. Without being able to detect incidents before they happen you'll be unable to protect your network and your data sufficiently. During an incident, stress levels are high and time is critical. A pre-established plan provides a clear framework for decision-making, ensuring that team members know their roles and can act decisively rather than panicking or making poor choices in the heat of the moment. Without this you face increased liability in case of data breaches or other security incidents. This puts you in a weakened legal position if faced with lawsuits from affected parties (e.g., customers whose data was compromised).

Your data's being held up by ransomware. Somewhere in your organization, someone invited malware in and it's running rampant through your network. You're facing a flood, an electrical nightmare or maybe a typhoon or apocalypse. You have to shut everything down. Only you have no plan to recover from this disaster. Disaster recovery plans can cover everything from basic recovery to more complex recovery based on your environment. Loss of critical data and systems, make it especially difficult or impossible to rebuild operations. You may even have difficulty obtaining insurance payouts without proper documentation of pre-disaster assets and processes. Completely avoidable.

Mistake #3: No Business Continuity - Why this can lead to unrecoverable damage

You couldn't recover from the disaster. Your customers are losing trust in you. The media is raining on your parade. All because you didn't create a business continuity plan to recover from a disaster and carry on. If you manage to scrabble your way out of the rubble, you may find that regaining customer trust is almost impossible. A business continuity plan prepares an organization to maintain essential functions during and after a crisis or disaster. This could include natural disasters, cyberattacks, pandemics, or other unexpected events. By identifying critical processes and resources in advance, the organization can respond more effectively to disruptions, minimizing downtime and financial losses.

What is a growing company to do so they are protected against external and internal threats?

Invest in a solid governance, compliance and risk program. Simply starting with policies and procedures will go a long way to protecting your organization against legal, regulatory, compliance and financial risks.

My GRC expertise is ready to assist in determining your current security stance and help you on your path to affordable, better compliance. Contact me today to request a consultation.

#governance #risk #compliance #policies #procedures #disasterrecovery #incidentresponse #cybersecurity #businesscontinuity #business #disaster #grc

The Evolution of Anti-Money Laundering (AML) in the AI Era

  

The Stakes of Financial Crime Prevention

The battle against financial crimes is critical, supporting efforts to combat organized fraud, human trafficking, and drug trade. This fight demands that investigators be increasingly agile, efficient, and thorough in their approach. The consequences are significant, often a matter of life and death.

Emerging Skills in AML

The AML field is evolving, with key skills now including:

• Proficiency in Generative AI (GenAI)
• Understanding of Large Language Models (LLMs)
• Application of Machine Learning (ML) in fraud detection and transaction monitoring

These technological advancements require:

• Human oversight
• Model risk management
• Strong ethical foundations

The integration of these skills is creating new roles that leverage human expertise in:

• Enhanced due diligence investigations
• AML policy development
• Cybersecurity threat hunting

Current Limitations and Proper Use of AI in AML

At present, AI should not be relied upon for tasks requiring judgment or decision-making. Instead, it serves best as:

• A rewording and summarization tool
• A technology assistant to enhance work output

It's crucial to understand that AI does not replace AML professionals. Rather, it should be viewed as a resource to augment human capabilities, providing summarizations and approximate information.

Challenges with AI: Hallucinations and Generalization

AI hallucinations remain a significant concern. Key points to remember:

• AI may combine factual and non-factual information
• It aims to provide desired responses, not necessarily accurate ones
• AI doesn't distinguish between truth and falsehood
• GenAI generalizes information, potentially leading to inaccuracies with highly specific queries

Essential Skills for the AI-Augmented AML Professional

1. Reviewing and validating AI responses and conclusions
2. Identifying mistakes, especially in compliance, investigations, and risk management
3. Understanding AI's strengths, weaknesses, and information processing methods
4. Recognizing and mitigating inherent biases in AI training
5. Adhering to a "verify before trust" approach

Getting Involved in AI within AML

To engage with the growing role of AI in AML:

1. Pursue introductory coding classes or self-paced certificate courses (including free resources)
2. Utilize reputable AI tools like ChatGPT, Copilot, and Dolly
   • Remember: While these tools are legitimate, they are still AI and require verification
   • GenAI aims to provide preferred answers, not necessarily correct ones

By embracing these technologies responsibly, AML professionals can enhance their capabilities and adapt to the evolving landscape of financial crime prevention.

How do you think GenAI will affect future AML jobs? Big, small or insignificant? Why? 

Where do you think GenAI could help in the AML space?

3 ways generative AI can help with financial crime investigations:

 

1. Pattern recognition and anomaly detection: Generative AI models can analyze vast amounts of financial transaction data to identify unusual patterns or anomalies that may indicate fraudulent activity. By learning normal transaction behaviors, the AI can flag deviations for further investigation.

2. Natural language processing of documents: AI can rapidly process and extract key information from large volumes of unstructured text like emails, chat logs, and financial documents. This can help investigators quickly sift through data to find relevant evidence and connections.

3. Predictive modeling of criminal networks: By analyzing historical data on known financial crimes, generative AI can create models to predict potential criminal networks or forecast likely future criminal activities. This allows investigators to take a more proactive approach.

3 ways avoid consumer friction while fighting fraud:

• Use device based identity resolution: Resources such as Neustar. Recognize trusted devices to reduce friction for returning customers while flagging potentially suspicious new devices.

• Behavioral biometrics: Use technology that analyzes user behavior patterns (e.g., typing speed, mouse movements) to identify potential fraud without adding explicit steps for the user.

• Streamlined KYC processes: Optimize know-your-customer procedures by using digital identity verification tools that can quickly validate customer information.

#consumerfraud #identity #financialfraud #fincrime #investigations #biometrics #kyc #banks #suspiciousbehavior #analytics

(A Couple) Technology Mistakes in FinCrime and how to avoid them

Over the past decade, technology in financial crime prevention has evolved significantly. When properly utilized, it serves as a powerful ally for financial institutions in their battle against fraudsters and in safeguarding customer assets. However, if misused, this same technology can become a destructive force, enabling theft, embezzlement, and devastating personal lives.

Modern innovations like sophisticated behavioral analysis, AI, machine learning, and robotics offer valuable tools for this purpose. When implemented effectively, these technologies can enhance the detection of suspicious activities, minimize false alarms, and accelerate response times.

The trick is understanding how to use this technology, when and where. It's onerous, it's expensive and as transactional volumes increase, so do the potentials for mistakes.

You Can't See Me: Illicit actors establish numerous fraudulent accounts through shell companies to facilitate the laundering of their unlawfully acquired funds. The proliferation of digital banking has intensified this issue, allowing for the rapid global transfer of immense amounts of money in near real-time.

Developing a secure technological infrastructure for the transparent and trackable sharing of customer data, disseminated via digital pathways under the control of sanctioned users, offers a solution to this challenge. This system, akin to a digital passport, can foster trust among participants.

You can have your privacy, but security too? How do global governments and regulatory bodies balance preserving their citizens' privacy with implementing sufficient oversight and transparency to safeguard against criminal activities? What's the optimal approach to simultaneously uphold citizens' rights and ensure their protection? There needs to be an innovative structure of working to combat these kinds of illegal activities via a collective, collaborative effort by both the public and private sector.

Enhancing protocols for financial institutions to verify suspicious activities would be a crucial first step. Ultimately, this issue revolves around trust: individuals must have faith in their governments and banks regarding the appropriate use of their information, while banks and regulators need increased certainty about account holders' identities.

Missed Evidence in not the same as overlooked, or missing evidence.

  

Missing evidence is not the same as missed evidence or evidence that is lost. When I speak of missed evidence it relates to evidence that could have been found had the right avenues been followed down.

One notable case is the O.J. Simpson murder trial from 1995. There was delayed collection of evidence wherein police waited hours before thoroughly searching the crime scene, potentially allowing evidence to be contaminated or lost. Among other errors there was overlooked evidence: A bloody fingerprint on a gate near the crime scene was not properly documented or analyzed. These investigative errors were exploited by Simpson's defense team to cast doubt on the prosecution's case, potentially contributing to his acquittal in the criminal trial.

This could have been avoided by:

• Following proper evidence collection procedures and handling,
• Following proper documentation procedures in criminal investigations

Instead, the playing field was leveled through time and age.

Thankfully, lessons were learned and have significantly influenced modern forensic science and criminal investigation procedures, leading to more rigorous standards and practices in evidence handling across the legal system.

A Blueprint to avoid the 5 biggest mistakes in FinCrime investigations

 

I love financial crimes and digital investigations. My aim is to guide other FinCrime Investigators to be the best they can be. I hold certifications in AML, Financial Crimes & Digital Investigations. I'm introducing a new and completely FREE min-course on improving your Financial Crimes Investigations.  You can see more here:  Better Financial Crimes Investigations