The Unseen Threat: Fighting Financial Crime from the Inside

A New Battleground for AML: Internal Threats

Banks have made tremendous strides in anti-money laundering (AML) controls over the past decade. From sophisticated transaction monitoring systems to enhanced due diligence processes, the industry is more prepared than ever to combat external threats. However, this progress has sparked a worrying trend in the Nordics and beyond: criminal actors increasingly attempting to infiltrate financial institutions from within.

Internal threats are not new, but they are growing in sophistication and scale. Employees with malicious intent, whether coerced or acting independently, pose a unique challenge. Unlike external criminals, they have access to internal systems, data, and processes—privileges that can be exploited to facilitate financial crime.

Why Internal Threats Are Harder to Detect

While external monitoring relies on identifying patterns and anomalies in transactions, internal monitoring requires a completely different approach. It involves scrutinizing the very employees you rely on to uphold your organization's integrity. This raises difficult questions:

• How do you identify suspicious behavior without eroding trust in your workforce?
• What indicators signal potential insider threats?
• How do you balance privacy concerns with the need for monitoring?

Addressing these questions requires not just technology, but also a cultural shift in how organizations view and manage risk.

Trends seen in the Nordics

In the Nordics, recent cases highlight how criminal actors are exploiting internal vulnerabilities. In one instance, an employee was found to be assisting organized crime networks by approving fraudulent transactions. In another, a staff member leaked sensitive customer information to external actors. These cases underscore the importance of proactive internal monitoring and robust security frameworks.

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A Multi-Layered Approach to Internal Monitoring

Fighting internal financial crime requires a multi-layered strategy:

1. Behavioral Analytics: Advanced tools can monitor key data points, such as access logs, transaction approvals, and deviations from typical workflows. The focus should be on whether employee behavior is being monitored at all and what specific data is analyzed to identify potential threats.
2. Segregation of Duties: Ensuring no single employee has end-to-end control over critical processes reduces the risk of exploitation.
3. Whistleblower Channels: Encouraging employees to report suspicious behavior creates an additional layer of accountability.
4. **Regular Audits: While audits are essential, waiting for an internal audit may often be too late, as the damage may already be done. Proactive measures are key to minimizing risks.
5. Training and Awareness: Educating staff on the risks of insider threats helps build a culture of vigilance.

Building a Culture of Integrity

Ultimately, the fight against internal financial crime is not just about technology or processes—it's about culture. Financial institutions must foster an environment where integrity and accountability are paramount. Employees need to feel empowered to speak up about potential risks, and leadership must set the tone by prioritizing transparency and ethical behavior.

Turning the Lens Inward

As banks and financial institutions continue to strengthen their external defenses, the battle against financial crime is increasingly moving inward. Addressing internal threats requires a delicate balance of trust and vigilance, supported by the right tools and a strong organizational culture.

Curious to Learn More?

In our latest episode, Hedvig Moe and Tor Gaute Indstøy discuss insider threats in organizations, sharing their expertise on how internal vulnerabilities can be exploited and what proactive measures can be taken to prevent them.

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