In the present globalised world, your money may not be completely safe in the bank. The days of exchange of hard cash are as good as gone. The digital age brought in the e-wallet and along with it came technologies that help fraudsters in their work. When a system changes, its users have to accept the change as they have little control over it. But the system is expected to compensate users for any loss they suffer because of the change. This can cause hardships to all parties involved. So, the right thing to do is to prevent new problems by addressing their possible causes.
In the past few decades, technology has changed the way people communicate, travel, work and, shockingly, cheat. New-generation fraudsters, who started work with personal financial data stolen from the devices their targets used, have graduated to using deepfake software, an offshoot of Artificial Intelligence (AI) research. Deepfake video calls requesting financial help are widely reported. Free software and tutorial videos to assist the activity are also available, making the situation even more dangerous. Criminals also resort to methods like SIM card cloning, phone hacking and sending fake transaction screenshots to their targets.
The banking system is used as the conduit for the money in almost every case. Thus, there is the urgent need to put a mechanism in place to recover the money obtained by the fraudsters. First, banks should have a specialised team to address such problems. Equally important is the intervention of international agencies like the United Nations since the fraudulent flow of money across international borders is becoming heavy. The best form of intervention can be a convention, signed by all member nations, which makes it binding on all parties to ensure certain minimum safety standards in their banking systems. If every country’s banking system maintains proper KYC, online data on the transactions of their customers, etc., it will help solve disputes over fraudulent transactions. Also, it will not be difficult to catch the fraudsters involved and reclaim the lost money.
Parties to the treaty should ask their banking partners and banks that are registered on their territory and operate abroad to adhere to the treaty. If a country, whether a party or not, does not do this, high-value money transfers, transfers from multiple bank accounts, etc., to or from that country’s banking system should be scrutinised and restrictions placed on them.
An international agency, on the lines of the Interpol, is essential to investigate banking frauds and identify the culprits.
Terror funding
The banking system is abused not just by fraudsters. At present it is difficult to detect terror funding as the funds are transferred disguised as legitimate money to be used for legitimate purposes. Even if a country bans an organisation, the bank accounts from which it received funds will still be active and it will be difficult to get hold of them without international cooperation. An international treaty will also help track drug money, illegal arms deal, etc.
Challenges can come from within the system as well. As the volume of cash transactions comes down, dependency on online banking increases. In such a situation the likelihood of banks indulging in malpractices cannot be ruled out. For instance, HSBC Bank was involved in laundering the funds of Mexican and Colombian drug cartels. The bank was fined $1.90 billion in the US (https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations). HSBC Bank’s failure to implement prescribed measures against money laundering resulted in at least $881 million of dirty money passing through the US financial system.
Again, in the digital era, with the help of advanced software banks can analyse consumer behaviour or spending patterns of their users. Online retailers can identify only what you searched for on their websites and what you purchased from them. But banks will know what you finally decided to buy, and from where, etc., as the money is transferred through their network. With the help of advanced software and AI they can understand your consumer behaviour and spending pattern. The possibility of banks, with so much information, working on new, illegal, business models cannot be ruled out.
This underlines the importance of banks strictly adhering to data privacy policies. The international convention should have strong provisions to ensure that the banking system across the globe is not abused by bankers as well as criminals.
This is very important because the banking system forms the blood veins of the economy of any country.
The writer is an advocate