Global Threat Assessment
by John Cusack
Despite the limitations presented in estimating criminal activity designed to be hidden, the results in the Global Threat Assessment present a bleak picture.
Criminal markets are generating more illicit funds than at any other time in our history, with ever more harmful effects inflicted against every Country, against billions of people and against our increasingly fragile environment.
We are witnessing the transformation of organised crime into very big business, leveraging networks to connect criminal actors, adopting poly criminality, embracing new cyber tools and opportunities afforded by the transformation to digital.
How big, which Countries, by what Methods and by which Gangs, is summarised in this Global Threat Assessment, using over 100 publicly available studies or reports from credible sources, together with personal observations and recommendations from the author.
In this Interview with the Hong Kong Monetary Authority’s Stewart McGlynn, who leads the Regulators Anti Money Laundering Team, Financial Crime News wanted to know more about HK, the risks and threats, de risking, the recent FATF Report, follow up actions, Regtech, PPP and much more besides. The interview reveals that HK has achieved a lot but also has plans to do more, much of which is exciting and offers the prospects for increased efficiency and effectiveness in fighting financial crime.
FCN: HK is one of the largest and most respected international financial and trading centres, but what attributes do you think are necessary to build and maintain this reputation?
SM: There are several key attributes which overlap to some degree and which can be related directly to anti-money laundering work.
In this Interview, Sarah Runge, formerly of the US Treasury Department, and now with Credit Suisse talks to Financial Crime News, including on how she rates the US Presidency (of FATF), challenges faced in Europe (and elsewhere), AML Reform and her optimism for the future.
FCN – What are you doing now – The fighting financial crime community knows you best in your former roles in the US Government so now you are at Credit Suisse, what does that involve?
SR: I am in a newly created role which dually reports to the Global Head of FCC and Global Head of Regulatory Affairs. The function is responsible for developing and implementing a centralized and coordinated view of FCC regulatory engagements, developing a consistent communication approach for our interactions with regulators, building a global inventory of relevant FCC regulations, guidance, enforcement actions & industry developments, and ensuring Credit Suisse is engaged in law enforcement and intelligence innovation opportunities.
On a recent visit to South Africa, Financial Crime News was delighted to meet with Nic Swingler Head Financial Crime Compliance at Absa Group Limited, who in an interview discussed the fight against financial crime on the African continent and in South Africa in particular.
FCN: How did you come into your current role?
NS: I am not a Financial Crime “lifer” and this role was not really part of my early career planning! Previously I was the COO for our Corporate & Investment Bank. The front line experience I gained over many years as well as direct exposure to products, operations, technology platforms and data were amongst the key attributes required to enable and deliver a high quality risk management capability across Financial Crime Compliance.
“Addressing the Remittance Challenge – by providing greater access to Banking services through limited purpose accounts.”
With the FSB amongst others concerned about access to banking services for Remittances, and with the recent announcement from Facebook and others that Libra may be an answer, Aamir Hanif assesses these issues and proposes a possible alternative in this article called “Addressing the Remittance Challenge – by providing greater access to Banking services through limited purpose accounts.”
In many emerging economies, remittance payments are not simply a financial service; they are a financial lifeline. For millions of families who rely on remittances for large portions of their day-to- day costs, they are a critical source of income. For local businesses, flows from the many millions of migrant workers underpin domestic consumption.
After an impressive year for FATF, under the US Presidency, which signed off last month, and concluded with the Florida Plenary, the Chinese Presidency now has the lead and has already signalled both an intention to continue with important existing FATF priorities, but are also signalling the next year will include something different, by including the illegal wildlife trade as an additional new priority.
The FATF announcement is significant, bearing in mind the importance China plays in the illegal wildlife trade as a major destination country for all manner of endangered animals, but this is not just about China, which had taken significant action over the last few years, including banning ivory, but about the entire FATF membership and all Countries subject to implementing FATF standards.
As promised Malcolm Wright provides an update to Financial Crime News on the Crypto Industry’s response to the challenge laid down by FATF to adopt wire transfer standards, in this follow on from his June piece “Crypto asks for more Effective Regulation,” and after the v20 Summit held last week.
On 28 and 29 June 2019, the crypto industry met in Osaka, Japan on the sidelines of the G20 to discuss how it would find an appropriate response to the newly released FATF Recommendations for AML governance of the crypto industry. The discussion focussed on how the industry could implement a solution to fulfil wire transfer requirements that exist already in the traditional banking sector. Helpfully, just one week earlier the FATF released Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers that provided clarification and direction for Virtual Asset Service Providers, or VASPs as well as countries and the traditional financial sector.
In February 2019, FATF issued its proposed recommendations for AML governance of the crypto industry. Under pressure from the international community, the FATF aimed to bring amendments to Recommendation 15 (New Technologies) into force at the June 2019 plenary. Within the proposals, one point was opened for consultation; colloquially known as 7(b) the proposal seeks to introduce wire transfer recommendations required of the traditional banking sector into the crypto industry. That is, originator and beneficiary information is collected, screened and transmitted between correspondent institutions with the objective to prevent criminals and terrorists having unfettered access to the financial system.
The crypto industry responded but not for the reason many thought; the response was not to fight against regulation or kick the can down the road for another day but to make sure that the regulation could be effective.
Virtual Currencies (VC) have come a long way in the 10 years since Bitcoin first emerged, born out of the financial crises and now a decade later they are considered part of the financial landscape. With more than 1,000 VC’s to choose from, tens of millions of customers use VC whether as a store of value, unit of account and/or as a payment medium. As with any currency, there are those minorities that use it to further illicit acts. Criminals have recognised that VC has unique properties that could potentially serve their interests in laundering illicit funds and evading law enforcement. Users of VC employ pseudonyms rather than names, funds can be transferred without intermediaries and across international borders as easily as sending email.
It has already been reported in FATF Country Evaluation Results – Part 1 that over 70 Countries were assessed based on published FATF Reports and highlights published relating to technical compliance with the FATF 40 Recommendations as well as on effectiveness based on 11 so called “immediate outcomes,” based on a simple scoring model.
Since then new reports have been issued on Finland and China, and updated reports on Italy and Norway that have re rated their technical compliance scores. Notwithstanding these new results the overall scores now based on 75 assessed Countries remain the same being an average of 64% for Technical Compliance and 31% for effectiveness.
According to FATF, “The extent to which a country implements the technical requirements…..of each of the  recommendations is important….but this is not sufficient” as “each country must enforce those measures and ensure that the operational law-enforcement and legal components of an AML/CFT System works together effectively …to deliver results.”
- Here are some highlights from the Country reports issued since the Plenary in February, 2019.