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- Financial Crime 2.0 programme launched today
- Rapid technological advances and the sophistication of global criminal networks have transformed money laundering threats and vulnerabilities since the international anti-money laundering regime was designed in the 1990s
- Extensive review of changes required to make anti-money laundering regime fit-for-purpose
Money laundering threats and vulnerabilities have radically changed since the fundamental architecture of the international AML regime was designed in the 1990s. Technological developments have enabled criminals to become increasingly sophisticated and to evade traditional methods of detection. The range of available responses has evolved too. By allowing financial institutions and supervisors to harness larger amounts of data, advanced analytics have the potential to significantly increase the impact of AML efforts across sectors and within individual organisations.
Over the next two years, the Financial Crime 2.0 programme will determine how the AML regime could be updated in order to be more effective and reflect today’s technological landscape. The research will be carried out by RUSI, supported by partners from EY, Lloyds Banking Group and Thomson Reuters.
The programme recognises that better information sharing has enhanced the effectiveness of AML in recent years. Beyond these initiatives, however, wider changes are required to allow stakeholders to make the most effective use of this information and respond to new challenges.
To inform this discussion, the programme will combine two concurrent initiatives.
The first initiative is policy-focused and will identify how core elements of the AML regime could be improved to create an enabling environment for the use of technology. In a report to be published at the end of 2018, it will establish what reporting requirements provide the most effective and proportionate basis for the use of advanced analytics by AML supervisors. By mid-2019, it will also assess to what extent the current compliance framework supports the effective prevention of money laundering in the private sector. This research will be informed by the growing role of artificial intelligence (AI) and by developments in data protection, particularly the EU General Data Protection Regulation (GDPR).
The second initiative will focus on the effective mitigation of new money laundering risks that are not fully addressed by the existing AML regime. This will include the threat stemming from the proceeds of emerging crimes such as ransomware, as well as the vulnerabilities of sectors such as virtual currencies and e-commerce that call for an innovative AML response.
Throughout this two-year period, the programme will engage with a wide range of stakeholders in the UK and globally through interviews and workshops, building on the collective desire to increase the impact of AML efforts.
Tom Keatinge, Director, Centre for Financial Crime and Security Studies at RUSI said:
“We look forward to supporting and accelerating efforts to update the AML regime in the UK and globally with this new programme. Our belief is that the starting point for such an update should be the opportunities of today’s technology. Designing an AML regime that harnesses those opportunities is one of the programme’s key objectives. In particular, we need to make sure that new technologies are not simply used to make the current system work more efficiently. Rather, new technologies have the potential to make a real difference in how effectively we tackle ill-gotten gains. The ‘Financial Crime 2.0’ programme will help realise that potential.”
Patrick Craig, EY EMEIA Financial Crime Leader, said:
“Financial crime is a systemically important, global issue that impacts society and trust in financial markets. Supporting industry efforts to disrupt financial crime is core to our purpose of building a better working world.
“We recognize that coordinated action by financial institutions, regulators, governments and international bodies is needed, and we are pleased to be a part of the cooperation that is being launched.
“Taking an intelligence-led approach, enabled by technological innovation and behavioural science, is critical to the effectiveness of financial crime management and we want to help the industry innovate and adapt.”
Brian Dilley, Group Director, Fraud and Financial Crime Prevention at Lloyds Banking Group said:
“We are pleased to support this review, in parallel to the work we are doing with the UK authorities to improve the UK SARs regime. The world has changed since many of the AML regimes were put in place and we need to ensure that we keep pace with the criminals to reduce the harm they do to society.
“It is no longer effective to consider different types of financial crime separately, as the criminals don’t. Cyber, fraud and money laundering are all part of the same process for them and, unless we look at them collectively, the criminals will hide in the gaps.
“It is time to use innovation as a tool to fight crime, rather than seeing it as a threat. I hope this initiative will help to identify ways in which we can make that happen.”
Phil Cotter, Managing Director, Risk at Thomson Reuters said:
“This is a vital programme and we are delighted to be able to play a role in ensuring the AML regulations are fit-for-purpose in a rapidly changing environment where criminals are becoming ever more sophisticated. Despite the considerable efforts and resources devoted to anti-money laundering, we only detect and recover around 1% of the more than $2.4 trillion of money laundering and other criminal activity currently estimated to be flowing through the international financial system. Headway has been made with information-sharing initiatives but far more needs to be done by both private and public sectors if we are to move the needle on detection rates of financial crime. At last month’s meeting in Davos, the World Economic Forum, Thomson Reuters and Europol launched a coalition to improve awareness of the extent of financial crime, promote more effective information sharing and establish enhanced processes to share best practice. We hope others will join the coalition to persuade decision makers at the highest levels of the importance of this task and of the uphill struggle we face in dealing with sophisticated criminals for whom national borders are no impediment.”
Notes to Editors
- RUSI’s new research programme, ‘Financial Crime 2.0’, aims to design an effective anti-money laundering (AML) regime that is in line with the opportunities and vulnerabilities of today’s technological landscape.
- Policy-focused work stream will identify how core elements of the AML regime, such as regulations and supervisory approaches, could be improved to create an enabling environment for the use of technology.
- Threat-focused work stream will focus on effective AML responses to new sources of criminal proceeds such as a ransomware, or to money laundering methods involving sectors that lie outside the traditional AML regime.
About RUSI’s Centre for Financial Crime and Security Studies
The Centre is dedicated to addressing the challenges and effects of financial crime and threat finance to the UK and international security, leveraging the important role finance can play in identifying and disrupting a range of globally-recognised threats. In pursuit of these objectives, the Centre conducts empirical research and analysis to develop a strong evidence base from which policymakers and practitioners can develop improved responses and best practice. For more information, visit: https://rusi.org/financialcrime
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
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About Lloyds Banking Group
Lloyds Banking Group is the UK’s biggest lender to SMEs, a leading mortgage provider to first time buyers and operates the UK’s largest digital bank.
The Group’s main business activities are retail and commercial banking, general insurance and long-term savings, provided under well recognised brands including Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows.
About Thomson Reuters
Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, visit www.thomsonreuters.com.