KYC, AML and ABC (Anti-bribery and corruption) compliance are water to the sharks, whales and bubble fish of the financial industry. The collection of customer identity and activity data is such a tradition that even during a recession, the compliance officer industry is booming. Regulator's role is to pressure banks and exchanges into compliance, while law enforcement attempts to hook onto the bigger fish.
This relationship has intensified over recent years with increased pressure on financial institutions to collect and mine user generated data. This is driven in part by a large uptick of 'financial crimes' and fraud of the legacy financial system.
According to BankTech, “'In 2011 banks and financial institutions generated more than one million SARS (Suspicious Activity Reports), of which the IRS reviewed 775,000. Thus far in 2012, the IRS has reviewed 500,000 SARS with case size in the hundreds of millions of dollars.” Producing a steady income for lawyers and the compliance industry in general.
BankTech adds that “Among the growing and most troubling trends is the double income tax return refund fraud. The IRS has seen a disturbing number of cases of identity theft where social security numbers and other personal information are stolen -- usually by well-organized Eastern European crime networks -- and used to submit a duplicate tax return and claim a refund.” There were 500 cases prosecuted in 2012.
This is believed to be because of growing dependence on the Internet to expand the effectiveness of financial services, both corporate and governmental. Many government websites today take in claims through automated forms, and most major banks are heavy on online banking.
The problem is that their security rests on a foundation that is continually being shaken, that of third parties securely handling customer's personal information. And with online and telephone means of accessing financial services growing, the value of individual's personal information is also on the rise. Particularly to those willing to commit identity theft.