Financial crimes are illegal activities undertaken by criminals to defraud the financial system and gain economic gains illegally. Financial crimes have become a major problem for law enforcement agencies during the past few decades. It has affected the global economy and hurt individuals and organizations alike. The amount linked to a financial crime makes up a large chunk of global GDP.

The most common monetary crimes prevalent today include, but are not limited to, money laundering, terrorist financing, credit card fraud, funds embezzlement, and corruption. Regulatory authorities have put in effect stringent regulations to curb this menace. These rules and regulations include Know Your Customer (KYC) and Anti-Money laundering (AML) procedures.

What are Financial Crimes?

These crimes involve individual criminals and organizations that aim to earn money illegally. These crimes are committed for personal benefits without showing consideration to anyone else. Surely, an egalitarian society cannot function in this way. Moreover, they are not limited to any region of the world and are committed everywhere. Even first-world countries are exposed to many white-collar crimes. In financial crimes, if a person gains a large amount of money, then it is always at the expense of someone. So, there is no such thing as harmless monetary crime. That is why the governments are investing so much to impede these crimes.

Major Types Of Financial Crimes

These crimes have become a part of everyday life. Its real consequences are only revealed to the world once a financial crime has been caught. These crimes have varying degrees and each one needs a special sort of enforcement regulations and measures to be quelled. Some of the most common financial crimes are stated below:

Identity Theft

When a fraudster uses someone else's ID to acquire money illegally, it is termed identity theft. ID theft has become a serious dilemma for the world right now. There are plenty of ways and platforms where identity can be stolen, forged, or created out of nothing. In financial crimes, it is used to steal credit card information and make illegal transactions. Furthermore, criminals commit identity fraud to apply for a loan or open a bank account.

Money Laundering

It is the practice of turning illegally earned money into white money. Moreover, storing your money in off-shore accounts, not paying your taxes, or not declaring your assets - all come under the umbrella of money laundering. Money laundering is not a novel problem but techniques to do it are continuously evolving. Nowadays, criminals employ tax havens, synthetic identities, and virtual currencies to commit this crime.

Terrorist Financing

This type of financial crime is not just limited to finances as its effects can be life-threatening. When illegal use of financial instruments is linked with terrorist organizations, law enforcement agencies are alerted. But, linking the movement of money with the perpetrator or the terrorist organization can be very difficult. In this type of crime, funds are first raised, then transferred, and ultimately used for funding terrorist acts.

Insurance Fraud

This type of financial crime occurs when someone makes an insurance claim for something that has not happened. Criminals state damages according to their desire, once they have created a believable story or found loopholes in the system.

Credit Card Fraud

This is when someone makes an illegal purchase with someone else's credit or debit card. This type of fraud is a felony, the punishment of which depends on the amount of money used illegally. It should be noted the card doesn't necessarily need to be stolen for this crime to happen.

Embezzlement

When funds, entrusted to an individual or an organization, are used for personal gain then it is known as embezzlement of funds. This type of financial crime usually happens in NGOs, NPOs, and government bodies.

How Can Automated KYC/AML Solutions Help?

Digital identity verification solutions ensure compliance of businesses with KYC and AML laws. These solutions run on AI and ML models to securely onboard customers. When identity is verified, a lot of ID-related crimes are quelled before inception. Moreover, biometric verification and document verification features provided by these services kill any chance of financial crimes.