Solving the financial crime riddle; more questions than answers?

It certainly feels that way as I compile and write this blog. We seem to see an ever-increasing series of challenges for the financial crime compliance community, yet truly innovative solutions to overcome them can seem somewhat of a Holy Grail.

Innovate or become irrelevant

Our round-up this week starts with a review of a programme which aims to put such achievements within arm’s reach, as the Financial Conduct Authority (FCA) published a report on the effectiveness of its innovation programme – ‘The Impact and effectiveness of Innovate’:

The report’s scope is wide but at its epicentre is the quest for innovative technology solutions in all spheres of business. Regtech is one such business area on a crusade to drive innovation and receives a lot of attention. Whilst vital that we harness the power of new technology, inevitably there are a host of challenges to overcome. This piece in Forbes considers some of the huge technological challenges faced by firms when embracing new technologyand what they should consider. As an organisation committed to technological innovation we’ve overcome challenges in our quest for excellence, and our very own CTO Vijay Raghavan, shares some of his wise words in the article.

Do fines drive change?

Hefty fines continue to be the punishment of choice for money laundering breaches, but is the medicine working? Many stakeholders would question the effectiveness of fines and whether the present approach is effective in tackling the threat.

Let’s start with the cost in terms of fines meted out to banks and financial institutions since the financial crisis, which runs into many billions. An article from Bloomberg earlier this year, ‘The cost of dirty money’, provides a handy map of the world showing the location and value of each major fine levied since 2009. But are they doing the trick? That’s hard to answer, but with indications that the amount of dirty money being laundered through our financial systems continues to rise (with estimates putting this in the trillions globally), it is fair to question the process. That said, some banks that have received hefty fines and had their reputations dented are doing more to bulk out their controls, as highlighted in this recent Bloomberg article.

*Teaser Alert* Our forthcoming research piece, which focusses on the effectiveness of the UK AML regime and was produced working with the Economist Intelligence Unit, will offer ideas from the regulated sector on how the UK anti-money laundering regime can become more effective. Look out for the report launch by following our LinkedIn showcase page.

Widening the regulatory gaze

Following the recent laundromat scandals, you could be forgiven for forgetting it’s not just the banking sector under scrutiny. Signs that authorities are beginning to increase their focus on other sectors are in abundance of late.


We start with crypto-assets which are soon to fall into regulation. The likes of digital wallet providers and digital currency exchanges are currently being drafted into UK money laundering regulations as part of the revisions required under the 5th Money Laundering Directive (which has to be implemented by early Jan 2020). The FCA has been consulting about the scope of regulation and who should be included; having closed in early April, the FCA will be making a policy statement on the consultation in the summer.

Meanwhile in the USA, The Manhattan District Attorney’s Office announced its first cryptocurrency-related money-laundering conviction. Two individuals pleaded guilty to selling nearly $3 million worth of controlled substances for bitcoins and other forms of payment, then converting those bitcoins into U.S. dollars.

Obviously crypto-assets don’t recognise international borders, and therefore a global approach to any associated risk is required. The Basel Institute has released a global perspective on regulation around the world and insight into the key issues surrounding the challenges in its Working paper 28 ‘Regulating cryptocurrencies; challenges and considerations’.

Legal Sector

Closer to home, the legal sector is coming under the spotlight. The Solicitors Regulatory Authority is waiting for responses from 400 law firms it has written to, requesting detailed breakdowns on their AML compliance programmes. As highlighted in edition 1 of FCIF, OPBAS released a report detailing numerous concerns about the strength of AML controls and quality of supervision in professional services industries. There remains the suspicion that many law firms have yet to get to grips with their responsibilities, and are an attractive and easy target for criminals to process their dirty money.

To help legal firms more effectively meet their AML obligations, our financial crime compliance team have just released a handy guide to customer due diligence for solicitors.

The message is clear, any firms covered by the 2017 money laundering regulations must get their house in order and adopt a robust and thorough risk-based approach to onboarding and ongoing monitoring of customers or risk hefty fines as already seen in the banking sector. The regulators are breathing fire!

Estate Agents

The real estate sector continues to have significant focus from its money laundering regulator – HMRC. Following a crackdown in March, which saw 50 estate agents suspected of trading without being registered receive regulator visits, HMRC has released updated money laundering guidance for the sector.

Those operating in this industry are now required to conduct ongoing monitoring and evidence they are doing so. In addition estate agents will be required to conduct due diligence on the ultimate beneficial owner, persons of significant control and their relatives or close associates in any transactions.

Unravelling the tangled web of sanctions

Finally this week, the ongoing saga that is President Donald Trump, North Korean leader Kim Jong-un and nuclear sanctions. There are enormous challenges for Western organisations in avoiding direct or indirect connection with sanctioned entities. As we have said before, simply checking names against a sanctions list is not enough – organisations need powerful research tools that can be used to establish the indirect relationships that can exist between sanctioned North Korean bodies and entities around the world (often in surprising locations). RUSI have recently released an excellent article by Tom Keatinge, which considers the challenges in detail.

As global sanctions programmes become more complex, maybe a little training on sanctions could be helpful. To help professionals hone their skills, ACAMS have launched a new sanctions training programme – The Certified Global Sanctions Specialist accreditation – which will be similar to the well-established CAMS programme.

Subscribe to Financial Crime in Focus to receive regular email updates.

Subscribe Today