Reading the Tea Leaves: a 2022 FRAML Outlook

Originally Posted February 21, 2022 on CUNA by Eric Tran-Le

It’s no secret: 2021 was an ever-evolving year for financial crime fighters. Both threats and world events emerged quickly to forever change the risk landscape, and credit unions have needed to stay five steps ahead to combat these new fraud and anti-money laundering (FRAML) vulnerabilities.

The four FinCrime pillars that defined 2021 

Faster payments and digital acceleration played major roles in creating environments that fraudsters and cybercriminals are happily abusing. By taking advantage of these weaknesses discovered in fraud prevention and authentication programs, bad actors have been able to conduct scams, commit faster identity theft. and gain access to sensitive data at a profound rate.

Most notably, there are four trends that have shaped the risk landscape most of all:

• Account takeover (ATO) —ATO fraud attacks drastically increased in 2021, with recent research revealing that 64% of financial institutions are experiencing higher rates today than before the onset of the pandemic. Generally, ATO stems from identity theft and entails unauthorized access to a legitimate customer’s online account to facilitate fraud and financial crimes.
• Mobile consumer fraud—Organizations are struggling to maintain the momentum of faster payments and secure faster payment channels while optimizing friction during authentication.
• Data breaches—In 2021, data breaches exceeded the total amount in 2020 by at least 17%, with approximately 281.5 million people impacted. This sensitive data was used by fraudsters and financial criminals to fuel diverse schemes and attacks, such as committing application fraud via synthetic identities.
• Dark web activity—Bad actors can cheaply procure sensitive data, financial mules, and synthetic identities, as well as a range of underground services to augment their crimes, in addition to sharing anti-fraud and evasion tools and controls. Financial services offices (FSOs) of all types, sizes, and in all regions are targeted by large criminal networks, who mobilize on the digital underground to organize campaigns against these institutions.

A look into 2022 for FRAML

As we move into 2022, FSOs must effectively prepare themselves for waves of attacks against not only their organization but also their assets and customers.

Ever-evolving fraud vectors and complex fraud risk, terrorism financing, and money laundering risks affect all channels and products of an organization. Couple that with the weaponization of data that was purchased off the dark web in the previous year, and we will see FSOs face threats on a scale unlike anything they’ve experienced before.

To stay ahead of these obstacles, credit unions need to fully embrace the modernization of their fraud prevention and anti-money laundering programs. Doing so will allow credit unions to stay vigilant in the coming months and not be caught off guard when these threats come knocking at their door.

Learn more about preparing your credit union for 2022’s FRAML challenges, as well as future challenges.