The global community at Davos must get real about financial crime

 
David Craig
DAVOS-politics-economy-diplomacy-SUMMIT
Crimetech needs to become as much a part of our modern vocabulary as fintech, cleantech or medtech (Source: Getty)

One step from total failure.

So was the title of a breakfast event held at Davos on Wednesday that looked at the serious social consequences of not implementing successful strategies for tackling financial crime.

How many people, when they pay £10 to have their car washed in the local supermarket car park, stop to think about terrorist financing? Did you pause to consider how many people worldwide are the victims of modern slavery?

Read more: Davos 2018: Top bankers warn of financial stability threats amid the calm

The answer to the latter, incidentally, is a staggering 40m, with a further 150m children subject to illegal child labour. But you’d be forgiven for not giving it more than a passing thought.

After all, when many people think of financial crime, they frequently think of it as a crime with no real victim or cost. Perhaps insider dealing or fraudulently making a claim against an insurance company. No one actually loses “real” money or suffers true harm.

Sadly, this perception is very far from the truth. From human trafficking in Malaysia, to prostitution in Romania, to victims of the drug wars in Mexico, the human cost of financial crime is very real.

Financial crime is a trillion-dollar industry that takes an enormous social and economic toll on the lives it touches. Moreover, it is an industry many interact with every day without noticing.

The above examples are just the visible surface of an industry estimated to be worth $2.4 trillion a year. Yet less than one per cent of these criminal funds are believed to be frozen and confiscated by law enforcement – we are one step from complete failure.

Which is why, more than ever, we need to talk about it.

Creating a shared future in a fractured world is the theme at Davos this year, as we witness cracks appearing across global political, economic, and social spheres.

As the banking and regulated world becomes more fragmented, criminal networks are becoming more connected, more global, and more technologically sophisticated.

Ensuring the quality and accessibility of data for anti-money laundering and security is key. London, as a major financial centre, is very much at the heart of this fight. In the UK alone, over 400,000 Suspicious Activity Reports are submitted to authorities per year, but much of the information is considered too poor to act on.

Crimetech needs to become as much a part of our modern vocabulary as fintech, cleantech or medtech, or any of other nouns we have coined to describe the impact that technology is having on society.

Those exploiting our financial system to perpetrate fraud, money laundering and other crimes are becoming increasingly sophisticated in their use of technology. Without understanding it, we cannot hope to have an impact on fighting it.

That was the purpose of the meeting that we convened at a very snowy Davos this week.

With Rob Wainwright (the director of Europol), Frederick Kempe (of the Atlantic Council), Geraldine Lawlor (Barclays’ global head of financial crime), and Paul Radu (of the Organised Crime and Corruption Reporting Project), we discussed why so little financial crime is detected; how we can deal with an increasingly global problem in an ever more fractured world; and how we can use technology to help us spot patterns that are evidence of crime to prevent malicious activity from happening in the first place.

The size of the audience in the midst of a packed global agenda was testament to the importance placed on this subject. Banks, financial services companies, and public institutions are all in the vanguard of fighting this crime.

But with the volume of transactions and regulations rising every day, many are faced with regulatory fatigue and overwhelmed by the onus placed on them.

A regulation-led approach to tackling financial crime is not working. It is also creating unintended consequences in terms of bank de-risking.

While the goals of financial inclusion and anti-money laundering regulation are not inherently in conflict, overly restrictive measures can impact access to financial services as banks de-risk, leading to adverse economic, humanitarian, and security implications.

The conversation at Davos demonstrated that there is a commitment to working together across industry, government and regulators to provide more momentum for our efforts.

These include promoting the Financial Information Sharing Partnerships that are having an impact in an increasing number of countries around the world, and supporting the work of the Financial Action Task Force on Money Laundering.

We also hope that Wednesday’s event will lead to new initiatives that will help us improve prevention and detection rates.

Today the message was clear: we are one step from failure. But voices are rising against the status quo.

Read more: Why fintech could lead to more financial crime

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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