Fraud & Sanctions, Corruption & Bribery, AML & CFT

In the world of payments the terms like fraud and sanctions usage is confusing, in the same way confusion do exist in case of AML & CFT. So, during customer on boarding, understanding these terms and knowing impacts of corruption and bribery are most important. In this article we will know about these terms with some examples.

Fraud

It’s an act of forging or falsifying the identity of someone or misleading someone to get their sensitive information or unauthorized accessing to derive benefits in illicit ways can be termed as Fraud. Fraud can be in person or over online or combination of both.

Some example:

  • Hacking by means of spying, phishing, malware attacks, man-in middle, etc.
  • Forging the identify of someone or misusing others identify (D.o.B, E-mail ID, Mobile Number, Address, Age, Gender Information)
  • Unauthorized accessing to others device, applications, online banking, etc.

Some prevention measures

  • To prevent fraud we need to enrich the system to identify fraudulent activities based on type of fraud.
  • Few ways to prevent online fraud are: IP filtering, Device ID identification, Multi factor authentication, Bio-metric authentication, location tracking, locale usage tracking, pattern recognition, etc.
  • Few ways to prevent offline fraud are: Asking few personal profile questions before processing the request, checking the validity of the person by verifying valid IDs, signature verification, photo compare, etc.

Sanctions

An act of curbing unlawful activities which disturbs peace and stability (politically, economically, socially, etc.) For more on this, refer the previous blogs part 1 and part 2.

Corruption

Misusing power to get work done or using once influence to get things done without which the outcome would not have been favorable is termed corruption.

Some example:

  • Politician using their power in getting contracts/deals in favor of their close connection.
  • Getting loan even when party is not eligible. Just because he is close to branch manager.

Some prevention measures

  • Carrying out through KYC, CDD measures
  • PEP – Politically Exposed Person’s regular profile check, timely monitoring their activities
  • Setup whistle blower policies and Anti-corruption laws

Bribery

The act of illicit donations or offering gifts whose value is not within the permissible limit to get the work done, w/o which the result may or may not be favorable to the donor. In other words, favoring someone who is favorable to us is termed bribery.

Some example:

  • Offering gift/donation to loan officer to increase sanction able limit beyond the usual value
  • Lending money to get a job in a company
  • Paying high value gift to the government official to get the tender in favor of the company by its director

Some prevention measures

  • Setting up anti-bribery law
  • Implement whistle blower policy
  • Continuous monitoring

AML

Anti Money Laundering (AML) is a process where the source of money (generally cash) are from illegal activities like: drug trafficking, human trafficking, unlicensed arms trade, smuggling, etc. That money goes through series of layering by entering into the financial system and joins the legitimate money.

Some prevention measures

  • Filtering payment data against AML scanning applications (refer sanctions section), hot scan against internal bank parameters and against country/international list

CFT

Counter Financing of Terrorism (CFT) is a regulation to be followed by each financial institution to counter funds going to terrorist activity or terrorist group.

Note:

Sanctions deals with countering AML and Financing Terrorism as well, please refer previous blogs on sanctions.

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