The scale of money laundering is hard to evaluate, but it’s considered to be substantial. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2 and 5% of global GDP is laundered each year. Europol assessment shows that is approximately between EUR 715 billion and 1.87 trillion each year.
Last significant financial crime schemes exploited certain vulnerabilities on the EU and national level, including the misuse of various types of corporate vehicle and shell companies; the use of third-party professionals and professional money launderers and the close dependency of small regional banks to their non-resident portfolio. The use of systematic transaction surveillance tools had proven that financial crime incidents (e.g. such as Laundromats, Paradise Papers etc.) are so well orchestrated and executed on a large scale with particular knowledge of the thresholds and internal bank’s controls that those remained undetected for a large period of time. Additionally patterns in the complex sanctions circumvention related techniques require tactical intelligence. The prompt and adequate identification of those is critical importance.
Well-timed and adequate identification and mitigation of financial crime risks can be improved by facilitating of sharing of financial crime relevant information group-wide. Nevertheless, inconsistent legal frameworks, data privacy restrictions, and bank secrecy present barriers that inhibit intelligence sharing. Regulatory expectations impose on banks to obey with highest standards for data protection, data security and customer privacy. As a result, financial institutions, law enforcement and regulators are constrained in seeing the complete picture of underlying criminal activity and illicit funds which flow across the global financial system.
"Well-timed and adequate identification and mitigation of financial crime risks can be improved by facilitating of sharing of financial crime relevant information group-wide"
The following factors can help to improve the joint public and private efforts for the disruption of financial crime:
1. Unilateral and multilateral efforts to improve financial crime information sharing - some good development has been achieved in addressing above barriers within the work of the Financial Action Task Force (FATF). Banks shall further wider pursue opportunities to share financial crime information where the principle of “legitimate interest” under the GDPR requirement applies. In order to develop and implement appropriate measures to mitigate risks stemming from certain customers, products, services, as well as jurisdictions, it is crucial to obtain adequate information on customers, their transaction patterns, expected location of transactions/activity as expressed by the customer, products and services used and, where necessary, on the source and/or destination of funds.
December 2020 FinCEN issued updated the guidance on Section 314(b) of the USA PATRIOT Act, where provides financial institutions with the ability to share information with one another, under a safe harbour that offers protections from liability, in order to better identify and report activities that may involve money laundering or terrorist activities. The new guidance also explains that there is no limitation under 314(b) on the sharing of personally identifiable information or any restraint on how the information can be shared. This clarification is significant as includes, for example, an attempted transaction, or an attempt to induce others to engage in a transaction.
