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Dena Hamilton, VP of Product at Featurespace

Real-Time Payments doesn't have to mean Real-Time financial crime

Real-Time Payments is the perfect opportunity to include Real-Time financial crime prevention technology 

Real-Time Payments (RTP) is reaching momentum in terms of implementation across the United States' financial system. 85% of firms in the United States are either in the process of implementing RTP or expect to do so within the next three years (PYMNTS, The Making Real-Time Payments a Reality Report, January 2020).

Numerous benefits of RTP  

The obvious advantage of RTP is the speed of payments. This benefit extends across the entire financial ecosystem - from consumers to merchants and financial institutions. It works by improving cash flow, process efficiencies and lowering costs. Equally as important is the amount of payment data that can be collected in a similarly short space of time.  

By using this data to understand individual customer behavior, it is possible to gain a clear picture of what "good" behavior looks like for each individual in real-time. Aggregating customer behavioral data in this way, creates a tremendous opportunity for financial institutions to use RTP as a mechanism to increase financial crime prevention by understanding behavior and spotting anomalies as they occur.

Gone Baby, Gone 

In a real time payments environment, criminals leverage account takeovers and authorized push payment scams to execute payments fraud. There are many attractive elements to this flavor of fraud for criminals, but chief among them is that the money is immediately accessible. This means, once the victim's funds are successfully transferred, check mate. The money is then quickly withdrawn or sent through a maze of downstream money transfers to other banks. 

Recovering lost funds is extremely challenging. Fraud teams can do their best to track down the funds but can encounter layers of problems that prevent a successful outcome. Following the trail of money from account to account is not only challenging but labor and resource intensive. Fraudsters know this and are keen on employing money mules to help move money stolen in payments fraud.

Implications for Anti-Money Laundering compliance 

In September 2019, reformed scam artist Tony Sales teamed up with Santander UK to look at the ways people are recruited as money mules. The work uncovered a list of social media hashtags used to lure people into unknowingly becoming money mules with the attraction of earning quick, easy cash.  

According to the article quoting research published by Santander, almost a quarter (23%) of adults would be tempted to click on a money mule recruitment post, while one in four (24%) under 25's admit to having previously engaged with such a post. 

A rather poignant outcome from the research found that a quarter of people (24%) either think there are no punishments, or don’t know the penalties for being a money mule. 

The recruitment of money mules is currently one of the growing methods used in money laundering. Criminals put tremendous effort into legitimizing the opportunity to sell people on opting-in, but it is surprising how little convincing it can take. The execution is usually nothing more than a simple set of instructions to an individual to move money from point A to point B, or by gaining direct access to the account. 

Lack of technological resources 

Over 40% of US businesses perceive a lack of technological resources as the greatest barrier to the successful implementation of RTP (PYMNTS, January 2020). This suggests that firms today are gaining knowledge about RTP, but still need education and technical guidance concerning its execution to protect their businesses. 

Banks are fighting highly motivated criminals who have access to unlimited resources to meet their end goal. What they also need is the resources, logistics, and time to stop financial crime in real time and recover losses just as quickly, ideally from a modern technology solution that spots changes in real-time to protect businesses and their customers.

A holistic approach to Real-Time Payments 

Financial crime takes many forms and continues to evolve with the pace of innovations to prevent financial crime. The risk trigger is that the RTP scheme has potential to be a catalyst that could drive an increase in large amounts of fraud.   

Featurespace's ARIC™ Risk Hub is a real-time transaction monitoring system that uses unique Adaptive Behavioral Analytics to create individual behavioral profiles and detect changes as they occur, resulting in truly adaptive risk prevention models. For real-time financial crime prevention, it is incredibly important to monitor both outbound and inbound payments, therefore ARIC uses machine learning to ingest data from all payment channels to provide comprehensive protection. The platform is self-learning, so the more data points it can learn from, the clearer the behavioral picture becomes, and it does this automatically in real time to continually update the behavioral models with the latest data - without need for manual retuning. 

Having worked with a variety of global financial institutions, Featurespace helps reduce financial crime as well as customer friction.  

Real-Time Payments doesn't have to mean an increase in real-time financial crime. With the best-in-class technology to support the work of financial crime prevention teams, attempts at committing these offenses can be stopped in real time.

Want to find out more? 

Download this whitepaper to discover some of the most prolific financial crimes seen today. Get clear recommendations for how to combat the threats and ensure your implementation of Real-Time Payments is secure, scalable and a success from day one with robust financial crime prevention in place.  

Download the Instant Payments Whitepaper

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About Featurespace – www.featurespace.com

Headquartered in the U.S. and U.K. and with offices in Atlanta, Cambridge and London, Featurespace™ is the world-leader in fraud prevention and creator of the ARIC™ platform, a real-time AI machine learning software that risk scores events in more than 180 countries.

The ARIC platform combines adaptive behavioural analytics and anomaly detection to automatically identify risk and catch new attacks as they happen. The increased accuracy of understanding behavior strikes the balance between improving fraud and risk detection and operational efficiencies, while also reducing the number of genuine transactions that would be incorrectly declined by as much as 70 percent.

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