February 13, 2025
For our second show of 2025, we are talking about crime. And we’ll be talking crime, all year long, as AIR is doing a lot of work on it. It’s a problem that is growing, partly because new technology has been empowering the bad guys faster than the good guys.
Here to help us learn is Soups Ranjan, CEO and Cofounder of Sardine. I invited him to join us because my friend and Soups’ colleague Simon Taylor (I hope you all read Simon’s brilliant newsletter, Fintech BrainFood), mentioned that Soups had created a great presentation on types of frauds and scams.
The term “financial crime” covers a lot of territory. Other than crimes of passion or ambition, most criminal activity is financially motivated, but some of it uses the financial system, itself, to obtain the financial gain, which in turn brings financial regulation and technology issues into play. The bad news is that these kinds of crimes are gaining ground, driven partly by new kinds of AI. The good news is that AI and other technology can also drive a counter-offensive that, if we’re smart, could turn back the tide.
Before we hear from Soups, let’s take a moment to catalogue three types of financial crime that are executed in different ways, have different kinds of victims, and therefore, incentivize different people to fight back.
First, the financial industry does daily battle against money laundering and terrorist financing, as required by law. Money launderers are committing crimes separate from the financial system. They harvest those illegally-obtained profits – typically in cash – and then feed that money into the financial system to "clean" it, hiding its sources so they can put it to use. The underlying crimes are typically things like trafficking in drugs, weapons, antiquities, and human beings. For the financial industry, the main motivation for combatting these crimes is regulatory compliance. The anti-money laundering (AML) laws require banks and other financial companies to try to keep these criminals out of the financial system and to report any “suspicious activity” to government authorities for investigation. Typically, the company never knows whether their suspicions were right (a situation that impedes the overall system’s ability to learn).
A second category is financial fraud in which the criminal steals money from a person’s bank account or credit card through an unauthorized payment. In the U.S. and much of the world, financial customers have legal protections in these situations. If they report the unauthorized item in a timely way, the financial provider is required to reimburse it. One result is that the industry has a financial incentive to find these criminals and get law enforcement involved in tracking them and shutting them down.
A third, rising scenario is scams in which the criminal tricks a person into actually authorizing a payment for a fraudulent purpose, such as a fake investment opportunity. A common version of this is romance scams, and especially “catfishing” type situations where the victim forms a relationship with the perpetrator online, and is then asked for money. Banks sometimes proactively advise customers against making such payments, but often find that the person proceeds anyway. In these situations, it’s the customer who loses the money. I spoke recently with someone at a crypto firm who talked about the challenge of trying to help protect people with whom they have no relationship, who are not their customers, but are falling for fake offers to make money in their coin.
Underlying and fueling all this is a vast criminal economy, with people selling our PII (personally identifiable information) on the dark web and selling crime methodologies that have come to be called CaaS – crime as a service.
Financial crime activities are increasingly being run by large international rings. Some of them are using captive, trafficked people to run their phone banks. Increasingly, they are using AI technologies like voice cloning and deep fakes to trick people. And with all of them, it’s very difficult for financial companies and law enforcement to catch the high-level ringleaders. Our current techniques often identify the front line people – like money mules moving cash around – but it’s much harder to roll up these big networks, especially when they are international.
If we are going to do better, one key thing has to happen: we have to enable much more sharing of information among the good guys – the financial industry and law enforcement. The people fighting these crimes need to be able to see enough data to detect the big patterns of crime, not just the little fragments that are visible in their own data.
And in order to do THAT – to share vastly more data – we need methods for keeping sensitive information private and secure.
To do this, we need to modernize both the technology and the laws that are used today.
The good news is that a lot of people are working on that challenge. Until we solve it, financial crime will continue to proliferate.
In today’s episode, Soups walks us through a range of types of crime and demonstrates some of the new methods for countering them. He shows us how traditional controls are losing their effectiveness in countering increasingly sophisticated attacks – including some of the “liveness” checks that, only recently, seemed cutting edge. He describes what compliance needs to look like in this changing environment. And he offers advice for the industry, the government, and the consumer.
We recorded this show as a video, and note that in the first part of it, Soups is sharing slides on key crime typologies. His full slide deck is also in the Show Notes. If you’re joining us in audio mode, I think his narrative is still easy to follow along, but I do recommend looking at those slides.
Again, AIR is doing a lot of work on how to counter the rising tide of financial crime and has prioritized these issues as an ongoing focus area. Late last year we hosted a TechSprint on consumer protection and payments fraud in West Africa. We’re working now on a TechSprint that will employ a “war games” type of format, with teams trying to use AI both to attack and defend in these crime scenarios. And we have much more in the pipeline. Watch this space!
Soups Ranjan is the CEO and co-founder of Sardine, a behavior-based fraud prevention platform that uses machine learning and AI to stop scams, safeguard payments, and streamline KYC/AML compliance.
Prior to Sardine, Soups was the Head of Financial Crime at Revolut and the Head of Risk at Coinbase. He holds a PhD in Electrical and Computer Engineering from Rice University, where his thesis was on scaling up web services to handle cyber threats and Denial-of-Service (DoS) attacks.
Drawing on his expertise using machine learning to fight fraud over the past 15 years, Soups founded Sardine to build the smartest platform for financial crime prevention. Sardine has emerged as a leader in fraud and compliance with over 300 global enterprise customers and world-class investors like Andreessen Horowitz, Visa, Experian, Google, and FIS.
We have wonderful episodes coming up. We’ll talk with Daniel Gorfine of Gattaca Horizons about our white paper on Earned Wage Access, including regulatory issues and how it fits into broader fintech innovation and consumers’ financial lives. We have an exciting discussion with the winners of our Call for Papers discussing strategic ways to use AI in financial services and regulation to benefit and protect customers. And we have an episode with Saket Narayan of AWS, discussing modern technology applications required by regulators.
2025 is shaping up to be another busy year for AIR. Late this month we are hosting a TechSprint on bank/fintech partnerships, including a focus on the evolving business models of community banks. My colleague Shelley Anderson spoke in London at State of Open Con, discussing how open source may help solve financial crime. I participated in Washington at the Aspen Institute’s Leadership Forum on Inclusive Finance, and I also have events this spring with the National Foundation for Credit Counseling and others.
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