The Evolving Role of Banks in Fraud Detection and AML Compliance – with Nick Lewis of Standard Chartered

Financial institutions are increasingly burdened with detecting and preventing financial crimes, leading to heightened operational costs and resource allocation challenges. 

According to the FBI’s Internet Crime Report 2024, cybercrime continues to rise sharply in both frequency and financial impact. Last year alone, the FBI received 859,532 complaints related to cybercrime — a notable increase that coincides with a surge in reported losses, which grew from $12.5 billion in 2023 to an estimated $16.6 billion in 2024. 

These escalating figures underscore the growing urgency for banks and regulators to adopt more sophisticated, technology-driven approaches to fraud detection and cybersecurity.

However, adopting these technologies requires significant investment and expertise, posing challenges for institutions striving to balance compliance obligations with operational efficiency. Moreover, the effectiveness of anti-money laundering efforts is often hindered by a lack of collaboration between the public and private sectors.

A 2024 study from the University of Portsmouth identified 75 instances of joint public-private initiatives aimed at combating economic crime. However, only seven of these initiatives focused on collaborative investigation and detection efforts.

Of these seven, at least five were dedicated solely to addressing external financial crimes, such as credit card fraud, while the remaining two had a scope of operations that was described in the report as broad or unclear.

Establishing robust public-private partnerships is essential for sharing critical information and resources and strengthening the overall financial crime compliance framework.

Emerj Senior Editor Matthew DeMello recently spoke with Nick Lewis, Managing Director of the High-Risk Client Unit, Standard Chartered Bank, to discuss the evolving collaboration between banks and law enforcement, the challenges of compliance, and the need for more innovative, data-driven approaches to detecting and preventing financial crimes.

This article examines two critical insights from their conversation:

• Strengthen public-private collaboration for effective crime prevention: Banks and law enforcement must enhance data-sharing frameworks to bridge knowledge gaps and improve investigations while ensuring compliance with privacy laws. 
• Improve suspicious activity detection with holistic analysis: Moving beyond isolated transaction monitoring and adopting a holistic approach using internal data, third-party sources, and government intelligence to reduce false positives and detect genuinely suspicious activity.

Guest: Nick Lewis, Managing Director of the High-Risk Client Unit, Standard Chartered Bank

Expertise: Leadership, Risk Assessment, Threat Mitigation

Brief Recognition: Nick worked in UK law enforcement for over 30 years and led several significant operations. He served as a Counsellor for Transnational Organised Crime at the British Embassy in Washington, DC, between 2008 and 2013. In March 2013, the US government awarded him the National Intelligence Medallion, and in 2014, Her Majesty the Queen awarded him an OBE for “services to international law and order.”

Strengthen Public-Private Collaboration for Effective Crime Prevention

Nick begins the podcast by discussing how governments are shifting compliance burdens to financial institutions, increasing business costs and risks in sanctions, fraud, and AML enforcement. While prioritizing higher-risk crimes is essential, better alignment between governments, regulators, and banks is needed to avoid conflicting expectations. He advocates for a risk-based approach over rigid rule enforcement.

Over the past 10-15 years, collaboration between banks and law enforcement has evolved. Initially, banks were either negligent or worked in silos, only providing requested information. However, this system proved flawed as law enforcement often lacked awareness of what data banks held, hindering effective investigations.

Nick highlights a shift toward greater collaboration between banks and law enforcement. Banks are proactively sharing information while maintaining privacy and legal protocols that help law enforcement better understand what data is useful for investigations.  

However, increasing compliance mandates, like monitoring for proceeds of crime, consume resources, limiting efforts to combat crimes like human trafficking. While banks are not required to detect trafficking, they recognize its financial patterns and want to assist, but mandatory tasks often take priority.

Nick discusses how challenging it is for banks to detect criminal activity in transactions, as they don’t always know whether a client is under investigation or on a “bad guy” list. 

He suggests that technology, specifically AI, could improve this process by combining government data on bad actors with bank transaction data. Combining these data sources would allow law enforcement and banks to screen for suspicious individuals without overstepping privacy boundaries, enabling a more efficient identification of potential threats.

Nick then illustrates the potential of AI by referencing recent terrorist attacks, where perpetrators were on watchlists but were not actively monitored. He proposes that AI could help detect suspicious activity like booking a flight or renting a vehicle, which could trigger an alert, identifying a potential threat in a financial context. 

He emphasizes that AI should not just be seen as a tool for reducing costs or replacing manual labor but as a crucial defense against criminals already using AI to stay ahead. The goal is to leverage AI to detect criminal activity more effectively and reclaim ground lost to bad actors using advanced technology.

Improve Suspicious Activity Detection with Holistic Analysis

Nick further explains that financial institutions (FIs) share information with law enforcement in two ways: 

• Push: Where they proactively report suspicious activity 
• Pull: Where law enforcement requests specific data

He highlights issues with the push approach, where banks assess transactions in isolation, leading to a high false positive rate. Since a transaction is just a snapshot of a client’s financial life, evaluating it without a broader context results in many alerts but few truly suspicious cases.

Instead, Nick believes banks should analyze client behavior holistically using internal data (past transactions, spending patterns), external data (third-party sources), and, if possible, government intelligence to better distinguish between routine anomalies and genuinely suspicious activity. 

On the pull side, Nick points out that law enforcement often lacks an understanding of what FIs can provide. They typically request simple transaction lists, but they really need metadata — details like transaction times, methods, and patterns that offer deeper insights into a suspect’s financial behavior. 

He stresses the importance of FIs educating law enforcement about available data and improving collaboration. By leveraging AI and data fusion techniques, both sides can enhance their ability to detect financial crimes more effectively.

Nick emphasizes that improving law enforcement’s understanding of the data available from FIs will help solve cases faster and more effectively. By educating law enforcement on what information banks can provide and under what legal conditions investigations can be streamlined, quicker case resolutions and a higher overall impact in combating crime will be achieved:

“We’ve got some jurisdictions where law enforcement doesn’t even trust law enforcement. It’s a big hill to climb to get law enforcement to trust a bank, but slowly, we’re getting there.

Slowly, this partnership approach is really producing dividends. There’s some great work going on in the US, protecting the victims of fraud, elder abuse, and romance fraud. There’s some great work going on in the UK, in Australia, in Singapore, on anti-scams and anti-fraud work.”

-Nick Lewis, Managing Director of the High-Risk Client Unit at Standard Chartered Bank

He notes that the private sector has been quicker to recognize the value of collaboration. Still, law enforcement is now catching up and realizing that the right partnerships, with the right data and the right businesses—not just banks but all private sector entities—can enhance investigations.