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Estonian anti-money laundering platform used to fight APP fraud

A real-time data-sharing platform originally built to identify money laundering is also being applied to the fight against authorised push payment fraud

An information-sharing platform set up to help banks prevent money laundering has evolved to fight a wider range of financial crimes.

The platform, originally known as AML Bridge, has proved effective in supporting banks’ efforts to tackle authorised push payment (APP) fraud.

During a trial of the software last year, Salv, the financial technology (fintech) firm behind the platform, said it prevented up to €3m of laundered money from reaching criminal-controlled accounts after banks took part in more than 1,200 “collaborative investigations”.

The platform also demonstrated its potential to help banks track APP fraud and see where the resulting funds end up, enabling the money to be returned to the victims.

In 2020, Salv, which was formed by former executives of Skype and money transfer fintech firm Wise, brought together the largest banks in Estonia to pilot the platform. This followed a large money laundering scandal in Estonia, whereby Danske Bank was found to have transferred more than €200bn of suspicious money through its tiny branch in the country’s capital, Tallinn. Danske Bank’s transaction-focused anti-money laundering (AML) detection apparatus had proved sluggish in identifying transaction anomolies at the branch.

Money laundering – and its links to organised crime – is a serious global problem in which banks find themselves at the centre. According to the UN, up to $2tn is moved illegally each year, with criminals using banks to hide money. In the UK, the National Crime Agency (NCA) estimates that money laundering costs the country’s economy £24bn each year.

Swedbank, SEB, Luminor, LHV, Bigbank, Citadele, OP Bank, Coop, TBB and Inbank all partnered with Salv to create an information and data exchange platform.

Now, after receiving a new round of funding of $4m, Estonian tech startup Salv is expanding and extending the functionality of its platform, now known as Bridge, to help banks combat the growing problem of APP fraud.

APP fraud, which sees criminals use fake websites and emails to trick consumers into authorising payments to them, caused losses of $789.4m to UK citizens in 2021, which could rise to $1.56bn by 2026, according to a report from payments software supplier ACI Worldwide and analytics firm GlobalData.

Salv founder and CEO Taavi Tamkivi said it became obvious the platform could also be used to track APP fraud, and because the criminals committing the fraud are also using the banks, it is possible for the money to be tracked and returned to customers.

“The platform allows crime fighting teams within the banks to warn each other and send real-time information about fraudulent transactions. The criminals are sending the money from bank A to banks B and C,” said Tamkivi.

“As soon as the victim realises something is wrong, they can contact the bank. Maybe the money has already gone, but the bank can share the information with other banks to see where it has gone.”

Read more about the Salv project

Tamkivi added that, during the trial, some banks reported that 80% of APP fraud was detected and the money reclaimed, which “reduces the motivation for the criminals to commit this crime”.

The pilot revealed the importance of all banks being connected on the platform, which has already been made possible in Estonia.

Andres Kitter, deputy CEO of the UK operations of Estonian bank LHV, said it had been working with Salv since the early stages of development of the crime-fighting platform.

He said it fills an important gap in the global finance sector because banks and other stakeholders in the finance system have traditionally lacked the tools to share information in real time and in a secure manner.

“Traditionally, people in banks might call or email each other with information, but this is not secure and there is no guarantee it goes to the right person. The Bridge is a good way to share data more quickly in a structured manner,” added Kitter.

“With APP fraud, the speed of information sharing is key because we are now in a period of real-time payment processing.”

At LHV, the financial crime team monitors the system as another tool. In the past, they would get messages from the Swift network and share information over the phone.

Bridge also improves the quality of the reports the regulators receive from banks, according to Tamkivi.

Currently, 10 Estonian banks are signed up to the Bridge platform, with 11 others outside Estonia going live in May and June this year.

Non-competitive cooperation

Sharing non-competitive functions can cut costs and improve the quality of services that banks use, and fighting crime through data-sharing platforms is an example.

“I hope that none of the banks in the industry would be so negative that they would turn fighting crime to a competitive advantage. This is an industry-wide problem and the fintech and banking industries need to work together,” said LHV’s Kitter.

He said building internal processes on top of technologies to share data would make society safer and deter fraudsters. “Fraudsters will be pushed away from countries where banks are cooperating because fraudsters always seek the point of least resistance.”

Kitter also pointed out that fintech companies such as Salv played a vital role in developing the technology banks will share. “It is unlikely that banks will want to plug into technology from a competitor so it is good that fintechs are neutral.”

Salv, which has about 60 staff, is based in Estonia, Lithuania and the UK. Set up in 2017, it started out by offering data science skills to banks and fintechs to help them analyse data to fight crime.

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