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The financial services industry has evolved significantly in recent years. While new entrants and technological developments have revolutionised certain aspects of the industry, they have also created new opportunities for bad actors to exploit weaknesses. Financial crime, including money laundering, is increasingly common and sophisticated, and financial institutions (FIs) and regulators alike are striving to shore up the industry.

UNITED STATES

Guidehouse

“Money laundering and other financial crimes continue to be an area of focus for US state and federal regulators. Last year, the Financial Crimes Enforcement Network (FinCEN) launched a new global investigations division that will target domestic and international finance threats and related crimes, so it appears that FinCEN is continuing to emphasise the importance of companies having strong Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance programmes. The establishment of the new division is also an acknowledgment that money laundering continues to be a complex problem, often involving multiple jurisdictions.”

CANADA

KPMG

“The volume, scope and severity of financial crimes have risen over the last few years as criminals have adapted and become more innovative in their ways of committing financial crimes. At last count, the UN Office on Drugs and Crime estimates that the equivalent of 2 to 5 percent of global gross domestic product (GDP) is laundered annually, equalling close to US$800bn to US$2 trillion. Furthermore, according to a 2017/18 annual report by Canada’s Financial Intelligence Unit (FIU), the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the top three predicate offences linked to money laundering in Canada are related to drugs, fraud or tax evasion.”

UNITED KINGDOM

Mazars LLP

“It is impossible to say with any accuracy the extent of money laundered in the UK, but it remains a serious threat to national security and the prosperity of the economy. London’s reputation as the money laundering (ML) capital of the world continues to precede it due to the risks associated with the scale of financial services and trading activities and the attractiveness of the super-prime property market. The UK’s National Crime Agency (NCA) recently published figures attempting to quantify the scale of ML annually and landed at £100bn. But if you doubled that figure no one would be surprised.”

IRELAND

Dillon Eustace

“Financial crime in Ireland appears to be growing in frequency and complexity. The most recent statistics published by Ireland’s Central Statistics Office show a significant increase in recorded incidents of fraud, deception and related offences. The number of such offences rose by 35.1 percent in the year to September 2019, from 5779 to 7805 recorded incidents. Suspicious transaction reports made to the authorities pursuant to anti-money laundering and countering the financing of terrorism (AML/CFT) legislation have also increased.”

SPAIN

Duff & Phelps, S.L.U

“Financial crime affects individuals as well as companies of every size. Multiple studies show that approximately half of all companies worldwide have already been a victim of financial crime and the percentage is slightly higher in Spain. Because most companies in Spain are small and medium sized enterprises (SMEs), the financial impact of a cyber attack is often significantly worse. A notable number of companies in Spain cease operations in the six months following an attack. The last decade has seen cyber crime evolve from being simply an IT issue to a boardroom concern, which has mirrored the digital transformation of the global economy on the macro level and of business operations on the micro level.”

SWITZERLAND

Deloitte Switzerland

“Over the last three years, the number of suspicious activity reports (SARs) filed in Switzerland has doubled, with a total value of almost 18bn Swiss francs. Global money laundering schemes, such as the Russian Laundromat, the Panama Papers, the 1Malaysia Development Berhad scandal and other corruption scandals have been linked to Switzerland and its banking system. The stringent regulations introduced by the European Union’s (EU’s) General Data Protection Regulation (GDPR), which also applies to Swiss companies under certain conditions, and banking secrecy laws, restrict the ability of banks to share information.”

GERMANY

Accenture

“Overall, there has been a strong increase in both the frequency and complexity of financial crime-related incidents, driven by at least five factors. First, ongoing ‘innovation’ and sophistication in fraudulent patterns and schemes, such as trade-based money laundering. Second, increased supervision and tighter regulatory requirements, for example there has been an increased focus on human trafficking and on combatting the financing of terrorism (CFT). Third, there is growing public awareness of financial crime, which has increased the impact and damage from singular incidents, as well as structural operational deficiencies among financial institutions.”

ITALY

KPMG

“In line with global trends, there has been an increase in financial crime in Italy in recent years. Italy’s economy is the eighth largest in the world and the third largest in the eurozone; its financial and industrial sectors are diversified. Many domestic organised crime groups are guilty of laundering funds, and tax crime is common. In 2019, Italy’s Financial Intelligence Unit (FIU) received 105,789 suspicious transaction reports (STR), a 7.9 percent increase over the previous year. There was also an 8.4 percent increase in the number of reports analysed by the unit, which meant that its backlog was reduced to an all-time low.”

RUSSIAN FEDERATION

Ernst & Young (CIS) B.V

“The size, frequency and complexity of financial crime is closely connected to the development of digital technologies. In 2018, Russian authorities recorded over 109,000 cases of economic crime in the country, which is 4 percent higher compared to 2017. The most frequent offences were misappropriation of assets, bribery and corruption, procurement fraud, client fraud and cyber crime. Cyber crime is now in the top five offences and, materially and reputationally, is deemed highly detrimental to the economy and national security.”

INDIA

PwC India

“Financial crime is growing in frequency, volume and complexity. One significant reason for this growth is the level of innovation that has occurred in the financial services industry in recent years, including in customer acquisition and servicing, the introduction of creative products and solutions, and new channels and platforms. These innovations have resulted in a marked increase in financial inclusion, allowing new entrants into the market and incumbents to increase their portfolios. Because of this rapid growth, the level of risk and vulnerabilities in the ecosystem has also increased considerably.”

CHINA

RegHub China

“In China, the number of people with access to financial services has increased significantly over the last decade, as technological developments have facilitated greater financial inclusion for previously underserviced populations. Chinese FinTech companies such as Alipay and WeChat Pay not only make online or mobile payments much easier for all of their users, including merchants and individuals, they also offer banking products online and sometimes act as an intermediary, which has led to a significant increase in consumer adoption of a variety of financial products.”

HONG KONG

ONC Lawyers

“The Financial Action Task Force (FATF) recognises that, while Hong Kong has a low and declining domestic crime rate, its status as a major global financial centre inevitably exposes it to potential misuse as a transit point for foreign proceeds of crime. There appears to be a rise in fraud crimes and particularly with an increase in email scams – email scammers typically hack into the computers or email accounts of targeted companies and businesspeople. They use the information to impersonate business partners, clients or executives and order money transfers. Between January and June 2019, the squad received 829 requests to intercept payments of HK$2.61bn from victims of scams in Hong Kong and around the world.”

AUSTRALIA

FTI Consulting

“Globalisation, along with advances in technology and communications, has created great opportunities for criminals to pursue new and innovative ways to profit from criminal enterprises. Sophisticated criminals from around the world, and certain nation states, can now commit financial crimes across international borders with relative anonymity in seconds. These crimes can take years to investigate, assuming any jurisdictional difficulties can be overcome. Financial crime, therefore, is continuing to increase in frequency. Complexity varies, and often financial crime does not have to be particularly clever or complex to be successful.”

UNITED ARAB EMIRATES

FTI Consulting

“Internationally, the scale and complexity of financial crime is growing quickly. Advancements in technology, coupled with the ever-changing geopolitical landscape, provide the environment within which money laundering typologies can evolve at a steady pace. In the past 12 months, the region has seen the prevalence of state-backed sanctions evasion networks, which are designed to circumvent international sanctions regimes to transfer funds on behalf of sanctioned nation states. Such networks are sophisticated in nature and exploit entities, such as exchange houses and front companies.”

CONTRIBUTORS

Accenture

Deloitte Switzerland

Dillon Eustace

Duff & Phelps, S.L.U

Ernst & Young (CIS) B.V

FTI Consulting

Guidehouse

KPMG

Mazars LLP

ONC Lawyers

PwC India

RegHub China