How Quantexa, HSBC and KPMG Help Safeguard the Financial Ecosystem Against Fraud

Financial crime, including lending fraud, is a serious and persistent problem for the global financial industry. It’s also very costly: Research from ACI Worldwide projects that financial crime and fraud will cost banks and financial institutions around the world $40.62 billion by 2027.

Keeping pace with financial crime compliance is expensive, too. A recent study by Forrester Consulting for LexisNexis Risk Solutions shows that the total cost of these efforts globally reached an eye-popping $206 billion in 2023, with 98% of financial institutions reporting that they’ve seen these costs increasing for their businesses.

In that same study, 81% of global decision-makers at financial institutions with responsibility for financial crime compliance strategy reported that improving fraud management and prevention is a priority for their financial institution in the next 12 months. Forty percent of the respondents said it’s a critical priority.

If your financial institution has the same objective for the year ahead, and you seek inspiration for how to improve your approach to combatting financial crime and fraud, you’ll want to check out the video that KPMG produced for the Hong Kong Monetary Authority (HKMA). The video premiered last year, but its anti-FinCrime message remains relevant. It features:

• Chad Olsen, head of forensic for KPMG China

• Charles Wong, head of financial crime and money laundering reporting officer for HSBC in Hong Kong

• Holly Miller, head of fraud solutions for Quantexa in the Asia-Pacific region

The three discussed how their organizations have collaborated to develop innovative and comprehensive solutions to help businesses in Hong Kong, and fight financial crime more effectively on a global level. Below are a few highlights from the video, including insight into how the Quantexa Decision Intelligence Platform helps banks and financial institutions gain an edge on fraudsters and other actors who commit financial crimes.

When it comes to fighting FinCrime, there’s “always more to be done”

KPMG’s Olsen acknowledged that banks are working hard to prevent lending fraud and other financial crime, but also noted that “there is always more to be done.” He explained that this is where data and technology—including advanced analytics, network analysis tools, and artificial intelligence (AI)—have an important role to play.

“By analyzing patterns and anomalies in the data, banks can identify potential fraud before it happens, thus preventing potential financial losses,” Olsen emphasized.

HSBC’s Wong underscored the challenge that financial institutions have in surfacing potential financial crime. He said recent high-profile cases of trade finance fraud in the Asia-Pacific region help to “illustrate the capacity and sophistication of corporate lending fraud.” He pointed to “forged documents and dubious financing leases” with “hidden parties and hidden connections” as examples of the nefarious but hard-to-identify activity that financial institutions must strive to find early.

Wong said that strong risk management and due diligence practices are vital for early detection and prevention of fraudulent practices in today’s financial risk landscape. And he explained that the prevention program that HSBC developed includes anti-money laundering (AML) prevention policies and real-time monitoring for fraud detection.

“This program identifies potential issues in the upstream, helping us to mitigate them before they become larger issues,” Wong said. “By using data and technology, we at HSBC enable ourselves to prevent potential fraud and safeguard our business.”

Identifying risks early, with more data and context

Quantexa Decision Intelligence Platform is one tool that HSBC, a leader in banking innovation, has long used to detect financial crime early. In an interview, Jennifer Calvery, group head of financial crime risk and compliance at HSBC, explained the value of using Quantexa’s platform. “If I wanted to boil it down into really simple terms, we find more of those financial criminals who are exploiting our products and services and we find them faster, through tools like Quantexa,” she said.

In the HKMA video, Quantexa’s Miller explained how decision intelligence technology from Quantexa helps financial institutions like HSBC to combat financial crime and prevent lending fraud by allowing them to:

• Consider much more data in their decision-making processes, including data from siloed internal systems and internal data “enriched with powerful external data like corporate registries, credit bureau information and watchlists.”

• Use AI to join data together accurately to “understand relevant, real-world behavior, relationships and networks that sit behind an application, such as customers’ counterparties, directors and shareholders.”

• Run analytics over this data foundation to visualize outcomes and enable better decisions.

“The impact of lending fraud can be devastating, but with the right tools, it can be prevented,” Miller said. She added that financial institutions can use advanced technology like Quantexa to identify irregularities in data, or early warning signals across the network that may indicate lending fraud.

“Quantexa’s ability to detect hidden connections between entities like individuals or businesses is particularly useful in identifying this type of complex fraudulent activity,” she said. “This key feature allows lenders to connect the dots and cover hidden relationships that may otherwise go unnoticed—ultimately protecting both lenders and customers from the damaging effects of fraud.”

Wong said this in the HKMA video about HSBC’s experience with Quantexa’s Decision Intelligence Platform: “Quantexa has given us the ability to analyze data from multiple sources, internal and external, which further enhances our efforts in identifying potential risk and preventing them from becoming larger issues. This has led to a significant reduction in instances of fraud.”

Learn more about Quantexa’s decision intelligence solutions for the banking industry.