Director, Financial Crime Risk, BCS Consulting
The collective fight against financial crime requires greater achievement by regulated businesses.
Financial crime, in its various forms, has serious social and economic consequences. Whether it is misappropriated public funds, laundering of criminal proceeds, financing of terrorist activity, tax evasion, or fraud, the victims are you and I. Although the harm manifests differently – a relative struggling with drug addition, reduced public resources due to a tax gap, increased insurance premiums as fraud costs are recouped, or direct financial loss – it falls on us all.
Barely 1% of money laundering cases are prosecuted and only around 1% of criminal proceeds are confiscated.
The intersection between financial crime and financial or professional services is vast. For example: illicit funds held in investment vehicles; authorised payment fraud; pre-paid cards used to fund terrorist attacks; corporates formed to obscure the ownership of assets; and offshore tax evasion schemes. Additionally, data breaches at regulated businesses can enable subsequent financial crimes.
For perpetrators, the rewards significantly outweigh the risks
Broadly speaking, regulated businesses recognise their front-line role and take their responsibilities seriously. Mid-large firms reportedly spend over £40m annually and deploy around 10% of their headcount on combatting financial crime.
Despite this, tens of billions of pounds are estimated to be laundered through the UK annually, yet barely 1% of cases are prosecuted and only around 1% of criminal proceeds are confiscated. The return on investment is questionable and the odds favour the criminals.
The UK has the basic ingredients to achieve its vision of defending against financial crime, preventing harm, protecting the economy and supporting legitimate growth – a comprehensive anti-financial crime legal framework, forward-thinking regulators, some successful public-private partnerships, innovative businesses and a sizeable talent pool. Perhaps following a different recipe will deliver better outcomes?
Innovate to better disrupt financial crime and improve customer experience
Greater resilience to financial crime can, in part, be achieved through innovation to deliver more effective risk management and supervision. Regulated businesses can enhance their financial crime risk management frameworks to be flexible, proportionate, intelligence-led and outcomes focussed.
Levers to pull on for greater efficiency and/or effectiveness include: enriched risk assessments; data management and analytics; more dynamic joined-up controls; and process optimisation and automation. Innovation in financial crime risk management can also dovetail with enhancing the customer experience. Crucially, regulators should give firms space to deploy enhanced frameworks but monitor and intervene when things go wrong.
Collective success, in
making the UK a more hostile environment for financial crime, depends heavily
upon regulated businesses being enabled to fulfil their financial, economic and
societal duties to improve the ROI. With the UK Economic Crime Plan in need of
funding, the uncertainty arising from Brexit and the adaptability forged
through the pandemic, it’s time for a strategic re-think.
 UK Economic Crime Plan, July 2019, Para 1.15 |  EBF blueprint for an effective EU framework to fight money laundering, March 2020, p.6