It was founded by Richard Elliot-Cooke, Simon McMahon, and Spaden Elmhirst, who have a strong track record in this field. Malverde supports financial institutions to understand how their organisations can be exploited by criminals and to deploy optimised models to manage these risks.

The UK: the financial crime hub

The UK is plagued with financial crime. 73% of the adult population have been subject to scams and nearly 50% of this number have become victims as result, handing over their hard-earned cash to fraudsters. Meanwhile, tens of billions of pounds – maybe even hundreds – are laundered through our financial system which facilitate crimes such as human trafficking and the drugs trade. And some UK businesses continue to support Russian sanctions evasion through increased exports to neighbouring countries which are then selling the goods to Russia.

Going beyond compliance

The UK is also heavily regulated. The burden on financial institutions to comply with anti-financial crime regulation is high, with a huge breadth of requirements to navigate. One example of this is the new obligation for payments firms to reimburse victims of scams from 7th October this year. The Payment Services Regulator (PSR) is taking this bold move to help protect consumers from scams. Whilst this is a welcome step, it will simply increase the cost of compliance rather than addressing the problem. Most scams originate on social media or via telephone, not in banking apps. So, whilst victims will pay less, the scams will continue.

Indeed, the UK financial services sector is already spending £35 billion a year on financial crime compliance, with limited impact to criminal activity. Malverde are firm believers that, by focusing on compliance, regulators and the regulated alike are investing their time and resources in the wrong areas. By better understanding criminal behaviour, regulators could do more to stop it at source and financial institutions could be much more effective at targeting it directly.

This is why Malverde think financial institutions should focus on understanding the real ways in which criminals misuse their services. Only once this is understood can technology and analytics be used to their fullest potential to help prevent crime. Shifting focus in this way will enable financial institutions to be much more instrumental to reducing crime whilst achieving compliance as a by-product.

Making the shift

Financial institutions require vast teams of people to keep up with fraud and financial crime regulation. It is often at direct odds with the commercial objectives of their business and so many firms try and get by with limited resources to demonstrate compliance, rather than attempting to address the real problem. That is, until regulators take enforcement action against them.

The regulators are also part of the problem. By focusing so strongly on trying to ensure strict rules and reporting requirements are complied with, they seem to lose sight of the objectives they are trying to achieve. A more collaborative approach between the rule-makers and commercial businesses to find innovative ways of stopping crime would be much more productive.

Malverde aim to support the industry to make this shift: From appearing to take action, to finding the most innovative ways of preventing financial crime efficiently.