In the new digital economy – the advent of digital banking and cash management, criminals have perfected the art of moving money across continents at the speed of light and technological advances have made it difficult for law enforcement agencies to tackle it. If money laundering was a country, it would have been the fifth-largest economy in the world and that equates to 3% of global GDP benchmarked at US$2 trillion according to the United Nations Office on Drugs and Crime estimates.
Fraud and money laundering isn’t a particularly nascent phenomenon but the Internet has been the biggest game-changer in the fight against financial crime. In our present world, money can be transferred and withdrawn without any corresponding trace variable like an IP address. The Internet aid villainous entities avoid detection through the anonymity of online payment services, peer to peer transactions, virtual currencies (crypto) and proxy servers to mention but a few.
Surprisingly, the actors in the fraud-value chain are not just the hackers or the drug cartels but willing conspirators (decision-makers) within the financial services industry who offer those illicit services to get hefty commissions in return. Beyond the surface, the impact of dirty money in the society cannot be over-emphasised – it’s used to fund conflicts all across the world and money laundering activities in particular shore up property prices in major cities.
There has been solutions and organisations put in place to mitigate all of these – like the Financial Action Task Force, the anti-money laundering body that is tasked with the effort to assessing global anti-money laundering effectiveness. According to their Effective-O-Meter, the average anti-money laundering stands at 32%. So, in retrospect, this means that most countries are doing a very terrible job in preventing corrupt individuals and their industry collaborators from stealing money and getting away with it.
In recent times, we have been hit by scandals including but not limited to; how individuals use offshore shell companies to hide corporate governance and ownership information, a bank rip-off that led to a major money-laundering scheme, a sovereign wealth fund scandal and how an international organisation, FIFA was enmeshed in financial controversies. No one is immune from these threats in a rapidly-changing global financial landscape.
Crime actors are consistently exploring new ways to exploit gaping holes in legitimate channels so as to masquerade their illegal proceeds as legal tenders. To solve this challenge, strategies need to evolve and there need to be collaborative efforts between the financial services industry, technology specialists, and the government. In the grand scheme of things, it is very pivotal to understand the motivations and modus operandi of the individuals that engage in dirty money trade. When businesses understand the enemies and their strategies, they can better protect themselves.
The stratospheric growth of technology has been beneficial to the anti-money laundering efforts but it’s also burdensome hence the dichotomy. On one hand, it gives insights, scope and scale to investigation and management and in the other vein, it could be layered and cumbersome due to the lack of interplay between legacy technology solutions and products and the more recent technologies. Amidst the persistent “noise” in the cyber arena, two new technological phenomena can redefine how financial crime is being tackled – Blockchain and Machine Learning. These technologies can be deployed to build synergy across internal and external third-party data sources and validating the link between transactions and entities.