AML RightSource
In this episode of AML Conversations, Joe McNamara, Director of Solutions Marketing at AML RightSource, sits down with Vesna McCreery, a seasoned financial crime compliance expert and Managing Director, AML RightSource International, to dissect the alarming rise in global fraud. Together, they explore the historical divergence and recent convergence between fraud prevention and AML functions, the trillion-dollar scale of the fraud problem, and how digitalization, AI-driven deepfakes, and cross-border criminal networks are transforming the landscape. Vesna draws on international comparisons—highlighting Australia's standout success in reducing fraud through real-time public-private partnerships—and shares actionable insights on integrating biometric controls, enhancing data utilization, and reducing false positives in financial institutions. This conversation delivers critical takeaways for professionals navigating the evolving threats in financial crime.
Episode Transcript
Joe McNamara (00:01.4)
Hey everyone, welcome back to another episode of AML Conversations. My name is Joe McNamara. I am the Director of Solutions Marketing here for AML RightSource. And I'm super excited about the conversation I'm gonna have today with Managing Director, Vesna McCreery. Vesna has volunteered to sit down with me to talk about the increasing volume as well as kind of the concern that comes with the growing issue of fraud.
But rather than me trying and lay it out for you, I'd rather flip it over to you, Vesna, tell us a little bit more about yourself and tell us a little bit more about what we're gonna be covering today.
Vesna McCreery (00:37.161)
Hi Joe and hi everyone. I am Vesna McCreery. I have been in-house in banks for about 25 years doing financial crime compliance. Started out at Goldman and went through a number of different banks through regional and global positions, global head of financial crime in a few firms and then moved into consulting.
which is what I do now. So I have been looking increasingly into fraud because it's a bigger problem than it has ever been, especially for our clients, as you know, Joe.
Joe McNamara (01:16.43)
Absolutely, right? And Vesna, I think that's actually a perfect jumping off point. You know, and we were just talking about this before we started recording, but you know, as somebody who's so deeply rooted in financial compliance and like you mentioned, AML has kind of been your bread and butter. You know, how are you looking at fraud today and certainly the convergence of what we're seeing of, you know, what some are kind of titling FRAML.
Vesna McCreery (01:40.897)
Yeah, yeah, yeah. I think in the early days when I started in financial crime, we didn't have that name. And it was just part of due diligence within legal teams or compliance teams. But then after 9-11, it became a much bigger issue. However, fraud and fraud prevention, particularly in the retail and commercial environments in banking, has always been around.
And that's because, of course, it was causing losses, and to prevent losses, bank always had their own controls, and they were sitting in operations. So after 9-11 and other changes, particularly in the UK at the time, which actually coincided exactly, those who were doing due diligence got settled with the titles of MLRO and BSA officer. And as they say, that's how it started. The rest is history. But what happened is that we grew up within compliance and legal departments, whereas fraud stayed in operations. And we were focusing initially more on policy, whereas fraud was focusing on preventing losses. And so there wasn't so much restriction on the investment into fraud prevention because that was the real gain from that. Whereas, you know, if you stop a money launderer, putting money into an institution, you're going to lose money. You're not going to gain money, right? So
Joe McNamara (03:00.536)
That's right, customers.
Vesna McCreery (03:02.894)
Exactly, know, people come up with a suitcase with a couple of hundred million and you put that in the bank. I mean, I'm joking. don't think maybe there were such cases, but I have never really seen that. But people say so. That's how we were quite distant and apart. But in the recent years with the massive growth of fraud, particularly online fraud.
the need to bring everything closer together, especially because data also has become digitized. Now we're in a better position to actually look at everything as data as opposed to different disciplines. So I think that's in a nutshell the history, I'd say. You can go into a lot more detail, but...
Joe McNamara (03:46.808)
absolutely. And I intend to. and again, as I think about your last sentiment there around, you know, what we're seeing from a trend perspective with fraud, scale is quite frankly, probably at the forefront of the conversation. So when we look around, you know, even at a high level kind of global perspective, how, how do, some of the key regions comparing when we're talking about what we're actually losing to fraud on a global level?
Vesna McCreery (04:12.776)
Yeah, you know, I had a look at the numbers and statistics. Really surprising. The fraud has grown to past a trillion a year in 24. And that is, know, identity fraud alone is 50 billion, which of course is one of the largest frauds out there.
And what's interesting is that fraud is growing everywhere around the world, predominantly in the digital space, online. And we'll break it down a little bit, but there is one place where it's going down. And that's something that you and I should definitely address. So in terms of the regional breakdown, the US is obviously leading. And I was really focusing on countries where our clients are. US is 12.5 billion, UK is 726 million in bank fraud losses. And there's also another SME area, the subject matter experts, that's us, but the small to medium enterprises, they also have significant losses. And then in Germany, the digital fraud has grown 58 % in the last few years, which is incredible. Probably the perception is that, it's because they're less sophisticated and there's less support from the government and banks for the losses. So people don't want to go online, but that means they're not as sophisticated. So it's harder. And then Australia is really interesting. That's where it's falling. The government from the regulatory side, the law enforcement, banks and unusually telecoms and providers of other services where fraudsters create their environments, is, you know, obviously the web, dropped by 25 % in one year because of the cooperation there. So that's incredibly interesting.
Joe McNamara (06:19.566)
100%. Right. And I think and you could get me started on the public private partnership model. And certainly I think that's what we're seeing in Australia. But to get back to what I would consider not only the gold standard we should be looking at, which obviously Australia's broken in to something that we should all be paying attention to. But when we're looking at what the current state is for other areas around the world, what are some of the key driving forces in this explosion of fraud that we're seeing?
Vesna McCreery (06:24.527)
Yeah. So I definitely want to address that. Can I give you a little bit more about why they're doing very well in Australia? Yeah, you know what they're doing? They've decided, in my opinion, the reason why this is working. I've talked to some of our clients in Australia. They say that it's because the telecoms and the web providers were involved.
Joe McNamara (07:01.582)
100 % let's go.
Vesna McCreery (07:15.536)
But they were working with the law enforcement and regulators in real time. So they were stopping calls and frauds as they were happening. And that's something that no, but they call it investment scam fusion cell. You can actually find a report online. It's not too long. And even in the summer, it's very clear what they actually had done. So it's really fantastic that they diverted real life live current.
Scam calls and then they share data in real time so that they can prevent this stuff and for them to see the result of 25 % drop I mean if they go at that rate they'll go down to a really low number within a few years of course the criminals are always developing ahead of all of us because they're cooperating across the globe and they find holes but this is so impressive
Joe McNamara (08:07.81)
No doubt, right? And when you think about like the overall characteristics of what I would consider traditional fraud fighting, know, one of the key expectations is, you know, it's retroactive, right? You can only react to what's happened. And so to see some of these new methods or models that are coming online and really being able to attack them at the source in real time, I think to your point is extremely impressive.
Vesna McCreery (08:33.349)
So you asked me earlier what's driving the explosion. think we all can guess that digitalization, us going, particularly after COVID, during COVID we were, you know, forced to go online. So even people who would not have perhaps gone online, like, you know, my mom and, you know, grandmas around us and so on, that's what happened.
And then another thing is that in the last year in particular AI production of deep fakes, faces, voices, mean YouTube, I don't know, I listen to podcasts a lot on YouTube and now there these people that I like listening to, there are lots of fake ones as well. I mean you kind of figure it out personally I can tell, but you know there is... Deep fakes have only made 7 % of all fraud so far, but they've...
Kind of grown some 400 % in the last two years, which is incredible. But they didn't exist before that, right? So obviously it's not surprising and I'm sure that's gonna be a big driver as we go forward. And then cross border crime networks. That's the serious stuff. When we talk about one point something trillion fraud losses, 10...
out of, sorry, nine out of 10 of the dollars in there is criminal organizations. So it's quite impressive what they're doing. They have entire, and we did a podcast earlier, I think last year about the criminal networks in Southeast Asia in particular. I mean, these are people who are, abducted from their homes, they're basically treated like slaves and they lived in these compounds in the regions between different borders. And they pose as real people and they do romance scams and all the other various scams. open fake accounts and, you know, we talked about cards and all sorts of stuff that they force these people to do. And I've heard recently that romance scams grooming can last even up to two years before they start stealing your money. Can you believe that? That is such a huge investment.
Joe McNamara (10:50.542)
That's right.
Well, absolutely. There was a fascinating report that came out not too long ago. think it was either TRM or Chainalysis, I believe, like published that not too long ago about that exact, that exact issue. You know, Vesna and I agree with you, right? Like at first glance or kind of first blush when you think about fraud, you know, you always, your mind kind of goes to these, like you mentioned these transnational organized crime outfits, you know, folks that are essentially like if they had a business card, it would be master of fraud, right? But at the same time, it's certainly, I think we're seeing some other trends on the individual space, correct?
Vesna McCreery (11:30.276)
Yeah, I mean, we all know that banks and insurance companies and many other companies are really concerned about being defrauded. And so when you sometimes start getting the questions from them, it's quite annoying. But when I was doing research for this, I always assumed there's going to be a number of fraud, fraudulent, but I didn't know that of all the incidents, 30 to 40 percent of the incidents, not the value but the incidents are from ordinary people who are defrauding companies. It's incredible.
Joe McNamara (12:06.734)
Which again is incredible. I had somebody tell me once that fraud and AML are both areas that when the economy is good, people are still finding ways to do it. But when there are economic pressures in place, it only skyrockets. goes up because like you mentioned, from a volumistic perspective, there are so many more incidents and trending upwards of ordinary people that are they, they, in some cases feel like they have no other option, right? Like you mentioned, you know, car insurance scams or duplicative invoicing or, or, you know, I was talking about like the Amazon refunds before we started, you know, all of these things is it's fascinating. And it does get back to what you mentioned at the start, which is, know, this digitally did, I can't say moving to the digital realm. but you know, in terms of, you know, other things that we're seeing,
Vesna McCreery (12:54.991)
Digitalization, yeah.
Joe McNamara (13:03.15)
I think you had mentioned something around silos as well, but did you want to give some more context to that?
Vesna McCreery (13:09.965)
Well, I think what's important for us, I think that the fact that people, ordinary people are, you know, defrauding so many businesses and there is a figure of a hundred billion loss to small, medium-sized businesses from fraud from ordinary people, which is really heavy for small businesses, right? And people often think, they can afford it.
I think that shows, interestingly to me, the culture where people feel that they're abused and used and so they don't mind doing it to other people, be it companies or someone else, which I don't particularly agree with, you know. But I think what it shows us is that controls and how to prevent this increasingly need to be connected between fraud and anti-money laundering.
Because ultimately, fraud has always been just a predicate offense, as we say in the UK, for money laundering. So what we see in money laundering controls is the aftermath of fraud among other crimes, right? And fraud supports a lot of other crimes, as I say, for example, slavery, modern slavery and theft.
And all kinds of stuff and then maybe they steal identities or cards and so on and they use them to create fake identities, they use them to create accounts and then they put money into that and that's within an organization. So actually the more we connect the view and as we've seen in Australia like a quarter of all fraud dropped in one year. That just shows that when you connect the dots between other providers, not just banks, but I think regulators and law enforcement are used to banks providing them all the information and all the pressure is on them and all the regulation is on them. But I think not only is that unfair, but it's actually not effective. We can see what's not effective. Exactly.
Joe McNamara (15:24.782)
Right. mean, you're missing the majority of that story, right? Like, it's not all happening within the account. to your point too, like from the transaction data and anything else that a bank can offer, I think they're doing a really good job and at least trying to play their role. But it is fascinating, right? And I want to hear more from you in terms of the relationship that we're seeing between fraud and AML, which I think, unfortunately, I kind of cut you off there.
Vesna McCreery (15:53.897)
No, no, no, you didn't, not at all.
Joe McNamara (15:56.578)
But it is fascinating, right? Because I think you mentioned at the start just how integral the data itself is. And you were talking about the flow of the data. But when it comes to what I would consider, from a financial institution or someone who's overseeing the overall risk to an institution, what are some areas that folks should be focused on?
Vesna McCreery (16:15.169)
So I think, you know, some things that we find to be useful for quick new customer take on, like biometrics, you know, you show your face, you open an account in some banks, it's really, really easy and quick. Having good biometrics, fingerprints, face recognition, voice recognition.
Connecting those dots, connecting that with the location and various other metrics that help you create a bigger picture of how the customer behaves and then knowing when that customer is acting out of the normal really does help or comparing the real biometrics with the fake. You know, there is quite a good record against those companies that provide anti-fraud tools. So they have quite a bit of success. Sometimes you can break past it, but not every criminal is super sophisticated. And then there is the other thing which could be potentially forgotten but shouldn't be, is that a number of tools such as natural linguistic programming and other tools that reduce the false positives in the space that in financial institutions we deal with, with alerts on sanctions and on transaction monitoring on things that we don't need to look at that are not risk relevant, does allow people to focus on actual risk. So I think that that is really important. And as we said earlier, Joe, the combining the data, the stuff that we see in fraud and the stuff to see we see in AML, obviously that's going to be very different if you're a market trader, then you probably are not going to need a lot of biometrics. But if you are a crypto firm that deals with retail customers or a bank and so on, then that kind of stuff really is important. So it depends what you are and what products you have. But a combination of all these tools that are out there, is really, really helpful. And doing and investing into that early on, bringing your data together and mining that data as well as you can actually prevents the losses that banks have. And even if they're not losses that banks have, even with fraud that is perpetrated against their customers who then ask for money back in some countries like in the UK.
Unlike Germany, where we've seen that there's not a lot of refunds, in the UK, in almost every case you get a refund. So, you know, it does help to have controls which save the money. So this is another way that fraud and AML are coming together these days.
Joe McNamara (19:09.791)
Anonymous. And again, I think it gets back to this concept that we saw with the Australian example, right, of being proactive instead of trying to be reactive. And I know that, and by the way, folks, there will be a tandem piece that Vesna's actually written up with a little bit more detail. But obviously, my mind goes to some of the examples you gave from a typology perspective. What are we learning and what are we knowing or continue to evolve our knowledge around?
What our customers do and what we should expect them to do, what good customers are doing versus the ones that do pose the most significant risks, right? And so I think, you know, with my final question, and I might be lying here, I might have another one after this, you know, my final question is really around, you know, if I'm a financial institution, what can I do right now to be keeping up with these types of threats?
Vesna McCreery (20:00.697)
Yeah. I think definitely investing in your controls, bringing AML and fraud together, subject to your product type. As I say, somebody who is a pure investment bank, they are going to have to do it through pure KYC. They just need to, they don't have transactions, so they need to look at who they're dealing with. But majority of financial institutions will have some exposure to transactions and therefore that means they are. Retail, have a number of customers who are small, big and so on. They do need to watch out the fakes because they can get also wrong instructions. It's not just the customers that are exposed to that. So invest into AI. As I said earlier, reduce the false positives. Don't forget to do that. Optimizing your tools like transaction monitoring tools, sanctions screening tools.
It's still worth doing because those people that you're already paying to do this stuff could be focused on something smarter than closing, you know, level one, obvious alerts. And then education of customers definitely helps. But I think of all the things and there is a lot of educational customers in the UK for sure. I'm really strongly aware of that. But fraud is rising. The only place where I've seen real change and drop in fraud is Australia.
I haven't seen anything else and that's where, you know, there is the systemic approach, as we've said. Regulators, law enforcement and institutions beyond banking and financial institutions get involved and work on it together and share live information and stop fraud and crime in real time.
Joe McNamara (21:59.95)
Which again, I think is a fascinating approach and we're certainly seeing the results of that model. I think, and to your point too, the education of customers, gets back to when your bank starts peppering you with these questions, it's probably good to give them, your customers a little bit more context around, here's why we're asking these things. It's not exactly apples to apples, but when I think about the overall approach, it's essentially crowdfunding or crowdsourcing.
The ability to keep your institution safe, right? If you can educate the customers that depend on you to access their funds and kind of give them a little bit more than just, hey, tell us the answers to these questions because we're the bank or whoever kind of holds your money. I think that there'd be additional transparency that would come with that. And certainly from the perspective of, and by the way, we're doing this to try and make sure that you're not gonna get scammed out of your money. You're not gonna fall victim and that we're going to kind of keep the nefarious actors out of this institution. So I think it's fascinating. I think it's.
Vesna McCreery (23:07.682)
Yeah, yeah. You know, what's happening is that a lot of our clients where we do either remediation or support them with their business as usual work, we're seeing that approaching customers for additional information, updating the KYC and so on, customers often don't want to respond because they don't trust that it really is the bank.
Joe McNamara (23:31.298)
Well, they don't understand why the questions are being asked.
Vesna McCreery (23:32.109)
So it's really scary. Yeah, it's so difficult because of that, the broad complication.
Joe McNamara (23:40.958)
I completely agree. Vesna, I appreciate you taking the time to sit with me and, you know, obviously this is probably just the tip of the iceberg when it comes to, you know, the larger fraud issue, but any final thoughts, especially around, you know, any kind of takeaways for AML professionals?
Vesna McCreery (23:57.853)
I think that the most important thing is to try and get the right investment and also to try and make sure that...
I was going to say circumvent, that's not the right word, but I think there is a lot of pressure on institutions that are global these days not to share data across borders. We're seeing a lot of jurisdictions are going back a little bit national data protection and so on, but criminals abuse that. And we've seen that the figures of fraud occur across the border much more than say just in the UK. So inflow of fraud coming into the UK from abroad is also greater. So that's why I think that this public private is great locally. But I think keep talking to Volsburg, keep talking to law enforcement across the globe and see what we can do to join forces to fight this scourge in the world.
And then I think another thing, Joe, that I know you're doing and we should mention here is I know you're going to talk to some of our colleagues who do the work for our clients and talk to them about what they're seeing as well in practice, which could be really interesting for a number of different institutions.
Joe McNamara (25:26.638)
Absolutely, right. And I think it kind of flies that same banner of information sharing safely, appropriately. But in this case, I think the numbers themselves, you know, kind of paint that business case as to why it's so incredibly important to form those partnerships and be able to, you know, continue to work and like you said, collaborate to address this scourge on the financial system. So Vesna, thank you again so much. Really appreciated the time.
Vesna McCreery (25:39.556)
Thank you.
Joe McNamara (25:55.094)
And hopefully we'll have you back on soon.
Vesna McCreery (25:57.187)
Thank you very much, Joe.