A common perception of financial crime is that it is “acceptable” wrongdoing with no real victim or cost. It could be insider dealing or fraudulently making a claim against an insurance company. No one actually loses “real” money or suffers true harm.
The true picture is rather different. The true picture is one of the headless corpses, dumped on a highway in Mexico, killed by members of a suspected drug gang. It is one of dozens of bodies found in a Malaysian jungle, victims of human trafficking, or 7.6 tonnes of pure cocaine, destined for Europe, discovered in a small Peruvian coastal town. Far from being victimless, the human cost of financial crime and the illegal activities it supports, is very real.
Regulators, law enforcement agencies, data providers and banks and other financial institutions are placing an increasingly high priority on tackling this issue. Rightly so, because while corruption and financial crime are not new - they have been a feature of society since the concept of money first developed – what is new is the technology available to financial criminals and the sophistication they apply to their crimes.
Tracking all of this money, establishing its use, and detecting any fraudulent behaviour that could be linked to serious financial crime, is not easy. Recent high profile cases involving banks accused of unwittingly processing laundered money through their systems shows how hard it can be.
In Europe, it’s estimated that criminal activity is worth at least €115 billion, and only about 1% is seized. Effectively professional money laundering services say ‘hey, give me you cash and I will launder it through the banking system, and my operating cost is only 1%.’
No single party can combat this alone. That is why it is so crucial to use all the tools at our disposal to step up the fight against financial crime. Regulators are requiring banks to make ever more stringent checks on their customers and perform rigorous due diligence to fulfill their obligations.
That is why it’s imperative that public and private sector organizations work in partnership with each other to exchange data and harness their expertise - as well as be able to share information across borders. Governments and law enforcement agencies tend to operate within national borders. Financial crime rarely does, and the perpetrators can exploit the differences in regimes and regulations to their advantage. At Thomson Reuters, we are planning to raise this issue at the World Economic Forum where we will hold a panel on Financial Crime January 24, 2018 that will include David Craig, President of Financial & Risk at Thomson Reuters; Paul Radu, Director of the Organized crime and Corruption Reporting Project; Rob Wainwright, Director of Europol; Fred Kempe, CEO of Atlantic Council; and Geraldine Lawlor, Global Head of Financial Crime at Barclays.
The use of data presents its own challenge in an era where companies, governments and organisations have to collect ever more information about who they do business with, at the same time as our individual online profiles get ever larger.
The balance between ensuring that data is used appropriately, but can also be accessed in the fight against financial crime, is a keen one. We are all – individually and as a society - made safer from drug gangs or human traffickers when we can make the best use of the information we have. But individuals must be able to be sure that their own data is not being traded or shared for anything other than the most vital security purposes.
Nor should it be forgotten that if banks lack confidence in the data available, they may avoid ‘high risk’ activities and withdraw financial services from the communities and markets that need them most, with a consequent impact on prosperity and economic cohesion.
As governments around the world seek to codify new data protection laws, all parties have a role to play in ensuring we get this framework right.
Only then can we really hope to take the fight against financial crime to the child traffickers, drug cartels and prostitution rings, and start to win it.