The Home Office pegs the annual volume of illegal economic activity at £14.4 billion, with reports of suspicious financial activities surging by 10 percent last year to a high of 463, 938. By any yardstick, these are alarming figures, and so it comes as no surprise that the British government recently launched the Economic Crime Strategic Board (ECSB) – a collective of leaders from the private and public sector – to strengthen anti-money laundering efforts in the United Kingdom.
The board, chaired by Home Secretary Sajid Javid, along with MP and Chancellor of the Exchequer Philip Hammond, will invest up to £3.5 million to reform the current (Suspicious Activity Reports) regime – currently, UK organisations are expected to file an SAR with the National Crime Agency (NCA) whenever they observe suspicious customer/client activity associated money laundering and terrorism.
In 2018, 95 percent of SARs were filed by financial institutions. It’s prudent to note here close to $400 billion in fines have been levied on both US and EU banks since 2009 – a large portion of these fines stem from alleged failures to identify and report money-laundering. As recently as the middle of last year, one of the largest banks in Europe was fined €775 million on account of lapses in their customer due diligence processes, which allegedly allowed bad actors to launder hundreds of millions of dollars. In their defence, banks have been deploying massive financial and human resources to enforce stronger controls. To what extent are these controls effective, however, is another question.
The ECSB, a cross-functional team comprised of experts from the public and private sector, is certainly a step in the right direction, according to Zac Cohen, General Manager at Trulioo, an identity services provider used by over 500 organisations, including some of the world’s largest financial institutions and fintech companies, to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations around the world.
“The real rewards of collaboration, however, are best realised when private players, regulators and governments share information in a secure way. As Rob Wainwright, former director of Europol, once put it: There are “black holes” – massive gaps in information sharing – between countries, which are exploited by money-launderers who operate through the banking system at a 99 percent success rate,” said Cohen. He, did, however, concede that facilitating this transnational sharing of information – even if it is done under the aegis of an iron-clad security framework – is difficult because it’s reliant on mutual cooperation and trust.
In the interim, however, there is one area of improvement which can go a long way in helping regulated entities prevent money laundering. “Prevention is the operative word here. Too often, fraud is reported only after the fact. Regulatory technology (RegTech) is effective not only in complying with regulations (which, we must remember, were put in place to combat money laundering), but also in preventing bad actors from entering into the financial system in the first place. In that context, RegTech represents the low-hanging fruit – governments, regulators and private entities must look into it because any anti-money laundering strategy would be incomplete without it.”