In 2022, the Federal Trade Commission (FTC) received a staggering number of reports regarding financial fraud in the United States. According to the FTC’s data, people in the U.S. reported $8.8 billion of financial fraud, which is 30% higher than the previous year. While the number of reports decreased from 2.9 million in 2021 to 2.4 million in 2022, the monetary figure paints a dire picture.
The Rise of Financial Crime
When we expand this globally, the numbers become even more alarming. Cable’s co-founder Natasha Vernier told TechCrunch that financial crime becomes a $4 trillion problem. This is a staggering statistic that highlights the need for robust controls and monitoring systems to mitigate risk.
The Role of Banks and Fintechs
Banks and fintechs have a crucial role to play in preventing financial crime. According to Vernier, banks and fintechs need to have controls in place to mitigate risk. These controls can include Know Your Customer (KYC) checks, sanctions, screenings, and transaction monitoring – all of which are offered by vendors like Unit21 and Alloy.
The Problem with Manual Controls
About a decade ago, banks were receiving fines from regulators for having "inadequate financial crime controls." While the number of those fines has dropped off as monitoring vendors have come in, some banks are still receiving fines for having "ineffective controls." This is because there is a second requirement that regulated financial institutions have to meet: independently testing if their controls actually work.
"So far this has been done entirely manually," Vernier explained. "Banks and fintechs manually sample a tiny percentage of accounts to try and see if those controls are working. That’s what we’ve automated, and we believe we’re the first and only automated solution available at the moment."
Cable’s Solution
Cable’s platform provides automated assurance and risk assessment, making it complementary to many financial crime vendors. It enables banks and fintechs to monitor all of their accounts – not just a fraction as before – to know in real-time if they are compliant with regulations and if their failure controls are working as expected.
Fintech Partnerships
Cable also gives banking-as-a-service organizations oversight on the fintech partners they work with. Most fintechs don’t have banking licenses, so they work with banks to offer financial services. Cable’s platform provides a solution for these partnerships by enabling banks and fintechs to monitor their joint activities.
Rise of Fintech-Backed Startups
Fintech-backed startups are on the rise, with many focusing on payment solutions, digital banking, and cryptocurrency trading. According to Crunchbase data, fintech investment has reached new heights in recent years, with 2022 seeing a significant increase in funding for fintech companies.
The Future of Financial Crime Prevention
As financial crime continues to evolve, it’s essential that banks and fintechs invest in robust controls and monitoring systems. Cable’s solution is a step in the right direction, providing automated assurance and risk assessment to mitigate risk. With the rise of fintech-backed startups, we can expect more innovative solutions to emerge.
Conclusion
Financial crime is a $4 trillion problem that requires a collective effort from banks, fintechs, and regulatory bodies. Cable’s solution provides an innovative approach to preventing financial crime by offering automated assurance and risk assessment. As the fintech industry continues to grow, it’s essential that we invest in robust controls and monitoring systems to mitigate risk.
