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Financial crime, including money laundering, continues to plague the global economy, despite increased efforts by companies, regulators and financial institutions (FIs) to turn the tide. Of course, over the last 12 months or so, the COVID-19 crisis has not helped. The impact of the pandemic has increased threat vectors – especially for FIs, by altering ‘normal’ red flags and complicating customer on-boarding and identification processes.

UNITED STATES

Guidehouse

“Financial crimes, including money laundering and fraud, continue to pose a threat to financial institutions (FIs) across the US. 2020 was an unparalleled year for regulators, financial institutions and their customers. As of Q1 2020, the COVID-19 pandemic had caused shifts in the timing of regulatory examinations and the nature of regulatory guidance in the US and across the globe. Furthermore, FIs changed the way employees worked and had to swiftly put business continuity plans and other controls into action to protect data.”

CANADA

Deloitte LLP

“Canada’s anti-money laundering (AML) regulatory regime is continuously evolving to respond to financial crime risks. At the federal level, the AML regulatory regime establishes a common set of requirements covering multiple industries, such as financial services, casinos and real estate, and the federal government announced funding to establish new AML law enforcement units in Canada’s four largest provinces. Some provinces have recognised the need to implement their own unique requirements to address provincial AML-related vulnerabilities.”

BRAZIL

FTI Consulting

“Financial crime trends in Brazil are directly related to cyber crime. In this regard, the financial market and the banking sector are the industries that suffer the most from these attacks. The most common financial crimes, such as money laundering and tax evasion, have become more sophisticated with the advancement of technology. The banks, for example, increasingly use compliance tools to automate the processes of combatting and preventing fraud, money laundering and privileged information leaks.”

UNITED KINGDOM

Grant Thornton

“The UK National Risk Assessment, published December 2020, identified diverse methods being used by criminals to exploit the global financial system, often facilitated by professional services providers such as accountants, lawyers and trust and corporate service providers. A similar Jersey publication in 2020 identified the island’s main risks as heavily influenced by the sectors and jurisdictions in which key business is conducted. The dominance of the Trust and Company Service Provider (TCSP) and banking industries in Jersey place it at a greater risk of money laundering, and the vulnerabilities in the domestic regimes of other jurisdictions allow criminality to occur elsewhere and the proceeds transferred to or through Jersey.

IRELAND

Dillon Eustace

“As a substantial and expanding international hub for financial services, Ireland’s exposure to and risk from financial crime is significant and increasing. Data from the Central Statistics Office shows that there were 7832 recorded incidents of fraud, deception and related offences in the year to September 2020. This was 0.8 percent down on the year to September 2019 but followed a 35 percent increase on the previous year. Rapid technological developments, particularly in the areas of online financial services, payment infrastructures and cryptoassets, have created new opportunities for criminals.”

SWITZERLAND

Wenger & Vieli Ltd

“Switzerland is a leading global cross-border wealth management hub for private clients. This makes it particularly exposed and vulnerable to financial crime and money laundering. In November 2020, the Swiss Financial Market Supervisory Authority (FINMA) published its annual Risk Monitor, which provides an overview of what it believes are the most important risks currently facing Swiss financial institutions (FIs), and money laundering continues to feature heavily. Owing to shrinking profit margins, FIs may pursue relationships with profitable new clients from high-risk emerging-market countries where there is a serious threat of corruption.”

GERMANY

PwC

“Germany is a stable country with a strong internationally interconnected financial centre and, until the COVID-19 crisis, a prospering economy. The country is highly attractive for investments of any kind, including, unfortunately, illicit funds. At the same time, German society is still relatively cash-savvy. Due to the high cash intensity of the economic cycle and the country’s economic complexity, overall the money laundering threat to German companies is medium to high. Today, financial crime occurs more frequently and with increased complexity.”

AUSTRIA

PwC

“According to the Austrian Bundeskriminalamt, white-collar crime has been rising steadily for years. In 2019, 71,112 cases, including 43,887 fraud offences, were reported. In terms of money laundering, the Bundeskriminalamt stated that, in 2019, the money laundering reporting office recorded a total of 3656 incoming files, compared to 3494 in 2018. Furthermore, certain types of crime showed a significant increase compared to the previous year: tax offences were up by 155 percent, corruption increased by 121 percent and money laundering saw a 21 percent increase.”

MALTA

FTI Consulting

“It is no secret that Malta’s rise as a financial centre has faced headwinds in recent years due to financial crime concerns that have exploited the jurisdiction’s favourable business climate. In response, authorities have prioritised improving the jurisdiction’s understanding of the problem, including by issuing new guidance and conducting more investigations. Although trending toward a more sophisticated understanding means that regulators and firms have a stronger chance of identifying money laundering and other illicit typologies, it does not necessarily lead to a reduction in criminal activity.”

ROMANIA

KPMG Romania

“Despite recent progress made in upgrading its legal framework and intensifying monitoring and enforcement actions against financial crime, Romania remains particularly vulnerable to money laundering and terrorism financing activities given its peripheral position within the EU, as well as its specific economic and institutional weaknesses. Romania was known as a hub for cyber crime long before the COVID-19 pandemic, with both the volume and sophistication of attacks continuing to grow despite significant coordinated national and international efforts aimed at curbing the phenomenon.”

AUSTRALIA

Ernst & Young Australia

“In September 2020, the Australian Transaction Reports and Analysis Centre (AUSTRAC) issued a record high AU$1.3bn anti-money laundering (AML) fine to an Australian financial institution, the largest such fine in Australia’s corporate history – surpassing the previous highest penalty amount, from 2018, by AU$500m. Unsurprisingly, the threat of large financial penalties, combined with a significant increase in regulatory scrutiny, has led to a greater focus from boards on managing financial crime risks.”

ISRAEL

PwC Israel

“Since the onset of the COVID-19 crisis, we have seen an increase in the three main types of financial crimes in Israel – customer and employee fraud and cyber crime. These, together with bribery and corruption risks, were ever present throughout 2020 and they had a significant impact on the business landscape. Businesses are now increasingly allocating more resources to fighting and managing financial risks. Anti-money laundering (AML) efforts are receiving significant attention given the current market conditions.”

UNITED ARAB EMIRATES

Corporate Research and Investigations Limited

“Fraud and financial crime is a worldwide problem, and we are not immune to its impacts in the UAE. The UAE has taken a strong stance against corruption and consistently leads the Middle East in Transparency International’s Corruption Perceptions Index for its efforts. The recent Anti- Commercial Fraud Law strengthened protections of intellectual property rights (IPR) and imposed stricter penalties on counterfeiters. However, certain crimes, such as money laundering, are causing increased concern in the region. The flow of illicit funds in Dubai is beginning to cast a shadow for international business conducted in the region and should urgently be addressed.”

SOUTH AFRICA

KPMG

“Weakly controlled access to state assets and country resources in the context of significant levels of wealth and income inequality, as well as weak institutions and a financial services and communication services sector with significant infrastructure and geographical reach, provides fertile ground for financial crime in the context of converting property to own use. High levels of criminal intent to strip South Africa of its resources exist in a pliable environment to convert such property to own use. Efforts by financial institutions to resist these efforts also informs this shape.”

CONTRIBUTORS

Corporate Research and Investigations Limited

Deloitte LLP

Dillon Eustace

Ernst & Young Australia

FTI Consulting

Grant Thornton

Guidehouse

KPMG

KPMG Romania

PwC

PwC Austria

PwC Israel

Wenger & Vieli Ltd