Blog: Combating money laundering requires a complex ecosystem of change

10.11.2021 | By Mark Speyers

Even though money laundering is often perceived as a mundane white-collar crime, in reality it’s anything but. Some of the most heinous offenses, including murder, sexual exploitation, human trafficking, and terrorism occur because of its prevalence – and it’s getting worse, not better.

According to the latest edition of SymphonyAI Sensa-NetReveal’ The global state of anti-money laundering, over half of all money laundering activity worldwide is slipping through the net, with 62 per cent of respondents admitting that this criminal activity has become harder to spot over the past 12 months.

Perhaps one of the most significant causes for concern is the fact that compliance within Financial Institutions (FIs) is proving not fit for purpose. Against a backdrop of looming budget cuts, 92 per cent of FIs believe the lack of collaboration between themselves, law enforcement, and policymakers is hindering progress.

So what can be done about this?

Challenging environment

Fraud, corruption, organized crime, terrorism, and human trafficking all loom large as the five most concerning money laundering activities of the past year. With cybercrime dropping down the list after coming in fourth the year before, it would be easy to think that the tide has turned. Think again. Unfortunately, cybercriminals have taken advantage of distracted home workers and cascading gaps in protection since the start of the pandemic, to steal data and deploy ransomware on a grand scale.

Our research suggests that the mix of technological challenges, issues with broader information sharing and collaboration across sectors, and cost and resource problems, have rendered efforts to tackle money laundering ineffective. Many respondents (35 per cent) also argued that it is extremely hard to measure how often money laundering is happening. A quarter (25 per cent) stated that technology is outdated, and 27 per cent claimed investigators could not keep up with alerts. A common theme is that many respondents lack the resources needed to spot problems (29 per cent).

Human impact

And while ostensibly a financial crime, the impact money laundering has on human misery and exploitation must not be ignored. According to the United Nations, approximately 50,000 people are thought to have been trafficked in 2018, with the real number suspected to be far higher. For every ten victims globally, around half were adult women and two were young girls, who are usually trafficked for sexual exploitation.

Such financial and human concerns mean FI teams want to do as much as possible to detect and help prevent all offenses associated with money laundering. Half (50 per cent) of respondents said anti-money laundering (AML) tracking is important to stop criminals. A further 46 per cent want to identify and support the victims of financial crime, and a similar number want to help protect society from its impact.

Resources lacking

Sufficient resources and the proper intelligent tooling would make a big difference. But it seems FIs are feeling under-supported by those who should share the same crime-fighting goals. They argued that too few suspicious activity reports resulted in justice (30 per cent of respondents) and 28 per cent lamented a lack of international cooperation.

To be clear, it is not simply a case of throwing more money at the problem. Resources must first be spent on the right kind of intelligent tooling to detect indicators of predicate offenses better. These can form the foundation of a new proactive approach to AML. Think of it as creating a financial crime feedback loop based on education, automation, and collaboration.

Affecting change

As it stands, most FIs do not have an AML intelligent division within their organization due to budgetary limitations. This is where education becomes an important driver internally, as only 25 per cent of respondents were only partially aware of the extent of money laundering and the challenges faced in combating it.

Collaboration, both internally and externally, forms an essential part of this financial crime feedback loop. This will enhance dialogue with policymakers to help them design more effective regulations which are more closely aligned with the reality of modern money laundering crimes. And it could also help improve intelligence-sharing with police, improving the chances of arrests and convictions while helping FIs with their own investigations.

Tying everything together is the technology being used. Although 80 per cent of FIs have an automation solution to help identify money laundering crimes, only 43 per cent believe an automation-first mindset is the answer to tackling the problem. This points to the importance of convincing managers how critical these solutions are to improve AML success rates.

FIs know they have a responsibility to minimize the suffering behind money laundering. However, they are just one piece of an increasingly complex puzzle in the fight against this deep-rooted scourge on humanity.

Enda Shirley explores the human cost of money laundering and examines what can be done to strengthen anti-money laundering efforts worldwide

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