Banks Trail Criminals in Tech Race According to RedCompass Labs

A recent industry survey conducted by RedCompass Labs, a leader in financial crime detection technology, has uncovered a concerning gap between banks and the increasingly advanced tactics employed by financial criminals. The findings suggest that many banks are struggling to keep up in the ongoing technological arms race against these sophisticated threats.

The survey, which gathered insights from more than three hundred senior payments professionals at various U.S. banks, sheds light on the significant challenges the sector faces in combating rapidly evolving financial crime. Despite ongoing investments in security and fraud prevention, the pace of criminal innovation is outstripping the sector’s current capabilities, leaving financial institutions vulnerable to new and more complex forms of attacks.

According to the survey, banks estimate that, on average, they are trailing behind financial criminals by more than eight months in adopting and utilizing new technologies for detecting and preventing financial crimes. This technological lag leaves institutions vulnerable, as criminals continue to innovate and deploy more sophisticated methods at a faster rate.

For smaller banks, the gap is less pronounced, with about a quarter of these institutions estimating that criminals are only 2 to 3 months ahead. However, larger banks are facing a more alarming situation, with some fearing the technology gap could extend up to 23 months. This significant disparity highlights the growing urgency for banks, especially the larger ones, to accelerate their adoption of cutting-edge technologies if they hope to close the gap and stay ahead of increasingly sophisticated financial crime threats.

Although a huge percentage of the banks surveyed remain confident in their ability to bridge the gap in technology, experts suggest that this optimism might be misplaced, especially given current detection rates. Financial institutions are contending with an ever-expanding range of threats, both longstanding and newly emerging. From well-known fraud schemes to advanced cybercrime tactics, banks are facing a wide range of risks that push the limits of their current capabilities.

The rapid evolution and increasing complexity of these threats make it even more challenging for banks to catch up and ensure high level protection for their customers.

It is also worth mentioning here that banks are facing considerable hurdles in quickly adjusting their systems to address new threats. A majority of banks indicate that it takes them several months (around 6) to update their fraud detection models after recognizing new financial crime red flags.

In response to inquiries regarding the obstacles that impede regular updates to their fraud detection models, banks highlighted a range of significant challenges. Among these, 27% of respondents pointed to internal governance issues, indicating that organizational structures and decision-making processes can slow down the necessary updates.