Financial Crime Risk Management

The practice of actively attempting to identify and prevent financial crime

What is Financial Crime Risk Management?

Financial crime risk management is the practice of actively attempting to identify and prevent financial crime. It is done by identifying suspicious activity and vulnerabilities that an organization possesses in order to mitigate the impact of financial crime.

There are various tools that can assist with financial crime risk management, such as employing analysts or developing software to protect against financial crime. Overall, financial crime risk management comes from the concerted effort of all parties to assist in preventing and mitigating financial crime.


Financial Crime Risk Management


Key Takeaways

  • Financial crime risk management is the practice of attempting to identify and prevent various forms of financial crime.
  • As technology has advanced, cybercriminals have come up with increasingly complex and deceptive ways of committing financial crimes.
  • Organizations are adopting more concerted and methodical approaches to managing financial crime risk.


The Current State of Financial Crime Risk Management

Financial crime has existed since the advent of money as a medium of exchange. In the past, criminals may have physically stolen cash or other financial assets. With the advancement in technology, electronic bank accounts and electronic payments now dominate our financial infrastructure. As a result, criminals have increasingly turned to technology to undertake financial crimes.

Criminals who use technology to attack individuals and businesses are known as cybercriminals. These cybercriminals have adopted various deceptive and sophisticated methods of accessing financial data without leaving a trail. Cybercriminals may be external, sitting outside of an organization. However, they can also come from inside an organization.

These crimes can occur at any organization, regardless of its geographical location or industry. These crimes are also committed on individuals. As more data continues to transition online, the more important it is to have protective risk management measures in place.


Types of Financial Crimes

Financial crime can be defined as taking money or property illegally from another entity for one’s own benefit. Major types of financial crime include:


There are also lesser financial crimes that are not as serious in nature as above, such as:

  • Petty theft
  • Skimming from transactions
  • Payroll schemes
  • Billing schemes
  • Using company funds for personal purchase


Who Commits Financial Crime?

Financial crime can be committed by various parties, both internal and external to an organization. This list includes:

  • Organized criminals – Often strategic, large-scale operations that are focused on committing financial crime
  • Individual criminals – Unaffiliated individual criminals, including hackers who have no connection to the organization that they are committing financial crime upon
  • Employees – The employees of an organization may commit financial crime
  • Business leaders – Executives or board of directors may commit financial crime


How to Protect Against Financial Crime Within an Organization

Financial crime is defined slightly differently depending on what jurisdictions an organization operates in. Understanding specific jurisdictional laws and learning which ones apply to a specific organization is therefore crucial. These financial crime laws must also be communicated across an organization so that there is broad awareness of them. The best ways to protect against financial crime include:

  • Use of shared intelligence – This includes sharing information and using financial activity and risk data linked to crime to prevent financial crime. It can be in the form of reporting suspicious activity and keeping records of transactions with complete transparency. Furthermore, collaboration with public entities such as law enforcement and regulatory bodies may enforce protection.
  • Prioritizing risk – This includes understanding the different levels of risk that an organization faces from financial crime.
  • Use of technology – This includes using innovative technologies such as data analytics and machine learning to predict potential vulnerabilities within an organization.


An actionable plan to reduce financial crime risk includes:

  1. Identifying risks
  2. Creating a plan to counteract or mitigate risks
  3. Implementing crime prevention systems
  4. Stress-testing prevention systems regularly
  5. Monitoring the effectiveness of systems

Overall, regulators, leaders, employees, and others must work together with data and technology to form viable protection from financial crime.


Benefits of Financial Crime Risk Management Tools to Security

Financial crime risk management systems are important in order to ensure that financial information is safe from cybercriminals. This has a direct financial benefit, as well as indirect benefits such as avoiding loss of reputation and customers. Tools for financial crime risk management such as risk analyst teams and risk management software can benefit security by:

  • Identifying suspicious behaviors
  • Preparing and organizing security alerts
  • Presenting potential threats and vulnerabilities through data to prevent future crimes


Thank you for reading CFI’s guide to Financial Crime Risk Management. To keep learning and developing your knowledge, we highly recommend the additional resources below:

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