Making sense of where we are in the fight against financial crime, and then suggesting the necessary actions to move forward to improve effectiveness is not an easy task. By looking back on what we know and has been reported in 2022 and prior years, the evidence increasingly indicates progress is not what anyone apart from the criminals would have hoped for, despite many successes, across all sectors, the overall scorecard remains “must do better“.
The FCN Fighting Financial Crime Dashboard for 2022 highlights some important KRIs and KPIs where some insights and conclusions can be drawn and from these actions highlighted to improve effectiveness going forward.
- Threats 1 – Traditional Crimes such as Drug Trafficking: The war on drugs is now 50 years old – even with seizure rates of illicit drugs between 10-20%, enough still gets through to meet demand and generate huge illicit funds. Is a focus on harms reduction a better strategy or a strategy in parallel and one focussed on trying to manage demand worth a try as well as considering legalising cannabis?
- Threats 2 – Cybercrimes such as Fraud: The fastest growing financial crime is fraud carried out increasingly using cyber means, with a response trying to catch up based on existing anti money laundering models. Is a new approach involving technology companies and social media companies as partners and responsible obliged entities required as well as mandatory public education, insurance and dedicated policing something we should be seriously considering?
- Threats 3 – Countries of Concern: Whilst FATF highlight 3 countries where countermeasures are required (Iran, N Korea and Myanmar), and 15 countries where strategic deficiencies and co operation to improve responses remain in progress (Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, Democratic republic of the Congo, Gibraltar, Haiti, Jamaica, Jordan, Mali, Morocco, Mozambique, Panama, Philippines, Senegal, South Sudan, Syria, Tanzania, Turkey, Uganda, UAE & Yemen), the overwhelming amount of financial crime proceeds are not generated or laundered in these countries. Whilst FATF are focussed on strategic deficiencies and non cooperation more than actual threats posed in terms of financial crime proceeds and money laundering, a change in this regard is needed. Countries likely posing the greatest inherent threat in terms of generating financial crime proceeds and laundering are the largest economies and trading nations of the world including in particular. USA, China, Japan, UK, EU including Germany, France & Italy, India, South Korea, Brazil, Russia & Indonesia. Isn’t an approach to focus even more on “elephants” and not “flies” in economic terms a better one, with clear commitments, targets and transparent monitoring a better way with the 37 FATF member countries (plus Indonesia and UAE) taking the lead?
- Responses 1 – Asset Recovery: With asset recovery levels overall significantly below on average 1% of estimated criminal proceeds, it’s timely the new FATF President has raised this as a concern and a priority that needs addressing. Is it time to set achievable targets which have worked in countries such as New Zealand, or to learn from countries such as the UAE and Italy who have had notable successes in this area?
- Responses 2 – Convictions: The numbers of money laundering convictions vary but for most countries they are small in number and relate more to self laundering with low level sanctions instead of related to professional third party money laundering and significant sanctions as was intended. Convictions for foreign bribery and human trafficking lag for example convictions for drug trafficking or fraud or for involvement in acquisitive crime in most countries suggesting these are much less a priority. Is it time to set achievable targets or to learn from countries such as the USA, UK, Italy, Germany & the Netherlands on how to increase money laundering and human trafficking convictions, and the USA on foreign bribery convictions who have had notable successes in this area?
- Responses 3 – Financial Intelligence Units: With SAR filing increasing year on year, and over 30 million a year, FIU’s are finding it hard to do what they were intended to do. The FIU is the conduit between the public and the private sector, and is the centre for the collection and analysis of financial intelligence to combat financial crime. With around 4,800 FIU staff for all 37 FATF member countries, this represents in terms of numbers likely less than the financial crime team in one large Tier 1 Financial institution. Is it time to relook at the resourcing of FIUs and to learn from FIUs such as those in the Netherlands, New Zealand and Canada who have achieved a lot even with limited resources?.
- Responses 4 – PPP & Information Sharing: With more than 20 countries establishing PPPs, and all reporting benefits but with just a few countries permitting private to private information sharing through statutory gateways is it time PPPs became mandatory with flexibility given to countries as to how they should operate and information sharing with safeguards between private sector obliged entities more actively supported?
That many of these insights and suggestions are increasingly considered mainstream and areas for consideration and discussed regularly with policy makers, industry leaders, regulators, FIUs and law enforcement represents a mindset change for many and a realisation that just doing what has been done before and expecting better results is not credible.