The fight against money laundering requires increased exchange of information

There is no doubt that the current anti-money laundering compliance framework does not work.

Money laundering, and the crimes it commits, is one of the biggest challenges facing governments around the world today. But it is a challenge so painfully opposed that we cannot even agree on its size.

However, one thing we can agree on is that the current anti-money laundering (AML) compliance framework does not work. Governments have effectively outsourced problem management to financial institutions. But according to a recent BAE Systems study, compliance professionals believe they spend too much time filling in boxes and not enough time to spot the wrong work.

Ultimately, effective compliance with anti-money laundering can have a real and positive impact on national security, society and the economy. But to achieve this, banks need to allocate more funds to anti -money laundering efforts, including advanced technologies, and stakeholders need to work more closely together. This is the promise of a “FinCrime feedback loop”.

The worst of mankind

Money laundering “predicate offenses” are a litany of humanity’s worst crimes. These include terrorism, human trafficking, organized crime, murder, kidnapping and sexual exploitation.

According to the United Nations Office on Drugs and Crime, the pandemic has been a boon for some criminals, especially those who profit from human trafficking. “The pandemic has exacerbated and brought to the fore deep, systematic economic and social inequalities that are among the root causes of human trafficking,” he said in a 2020 report.

The bad news is that these crimes are becoming harder to identify, according to AML compliance professionals we interviewed. Nearly two-thirds (62%) say money laundering is more difficult to define than a year ago and they generally believe more than half of cases get through the meshes of the net. One quarter says they are forced to work with old technology, slightly more (27%) fail to keep track of the number of alerts generated, and a third says they lack enough resources to do their job.

What if the conformities themselves are the problem?

Beyond these challenges, there is another major culprit of past failures in anti-money laundering: the culture of compliance itself. Three-quarters of respondents to our survey say compliance has become a box-ticking exercise and a fifth speak of a “stagnant culture”.

This is not the first time these ideas have been expressed. A report by financial crime expert Robert Pol, published in February, described the fight against money laundering as “the least effective policy experiment in the world”. A year earlier, the well -known think tank RUSI had published a report highlighting concerns about the regime put in place by the Financial Action Task Force (FATF). He noted that the intergovernmental body governing the fight against money laundering determines the validity of its recommendations according to the method of their implementation, and not according to their ability to prevent crime.financial.

Recent events seem to emphasize that current regulations against money laundering are not working. A UK lender recently pleaded guilty to failing to refrain from laundering nearly £ 400million of a customer’s funds. This is a lawsuit brought by the Financial Conduct Authority (FCA). Other cases may be in process.

Separately, a massive data breach coordinated by the International Consortium of Investigative Journalists has exposed the questionable financial dealings of hundreds of government officials and billionaires around the world. It led a Tory MP to describe Britain as the ‘money laundering capital of the world’.

time for change

Our research shows that compliance professionals want to do what is right, for their employers, for victims of money laundering and for society as a whole. But they need support. Half of those surveyed want policy makers to do more, and 92% say the lack of collaboration between banks, policy makers and law enforcement hinders development. Here the “FinCrime feedback loop” can help, improving collaboration across the sector and between the public and private sectors, strengthening technology and allocating more funds to the fight. against money laundering.

Funding for IT security, fraud and risk was reduced by 26% on average by US and UK financial institutions during the pandemic. It must change. Most financial institutions still do not have an anti-money laundering intelligence unit, for example.

Money needs to be targeted more effectively. Some of that money should be spent on improving internal practices so that analysts can better see indicators of major financial data breaches. Funds should also be spent on purchasing smarter automated AML solutions, which detect patterns of suspicious behavior that can be overlooked by the human eye, while freeing staff to focus on the more important ones. task.

But perhaps the heart of the FinCrime feedback loop is the idea that stakeholders need to improve collaboration. More than a quarter of compliance professionals say the feedback they receive from police and government on their AML reports is unhelpful or rarely given.

Through better communication between all parties, the police should get information faster to facilitate investigations and policy makers should consider the reactions of the sector to make the regulation.

To achieve this, all parties need to admit that current strategies have failed and spend time, money and effort to fix it. It won’t happen overnight, but the stakes are too high to ignore the problem.

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