The findings of the report, from SymphonyAI Sensa-NetReveal’ Applied Intelligence business, suggest that banks are unable to keep up with the 22 crimes defined by the EUs 6th Anti-Money Laundering Directive, with human trafficking emerging as one of the most prevalent problems.
The report is the combined study of two global pieces of research among 452 respondents working in compliance or risk management across the financial services sector and more than 6,000 consumers in six markets.
Human trafficking: a very real threat in 2020
According to the UN, there are an estimated 25 million victims of trafficking worldwide, making this crime one of the most prevalent money laundering offences globally. The problem continues to rise with banks and other financial institutions struggling to spot and stop offences among their transactions. The most recent research from SymphonyAI Sensa-NetReveal found over a third (36%) of financial services professionals aren’t confident in spotting signs of human trafficking in their customers’ transactions. A further 28% have stated that financial crimes leading to human trafficking already account for significant financial losses for them. And, looking at further recent data, the projected total cost to financial institutions to detect financial crime stands at $180.9 billion globally, $138.8 billion in Europe.
Further to this, over a quarter (26%) of financial institutions admitted to having to report and investigate criminal financial activity linked to human trafficking and almost three-quarters (75%) aren’t confident in their ability to identify human trafficking signs amongst transactions.
Customers willing to leave banks that don’t demonstrate a strong ethical stance
Having a conscience is key to brand loyalty according to the consumer respondents surveyed. Three-quarters (75%) of customers would leave their bank or financial institution if they fail to demonstrate proactive approach to money laundering/ethical practices linked to money laundering. 84% of those surveyed globally believe that it is important for banks to demonstrate conscience through good ethical practices. When the financial institutions were questioned on this same topic, almost a half (43%) report money laundering to regulatory bodies as they understand customers want to know their bank is ethical.
“Money laundering is a challenge that goes way beyond financial risk and corporate reputation. Yet it is also shrouded in opacity.
At this moment, criminals are rushing to take advantage of every opportunity to exploit gaps in the global financial system. They look for vulnerabilities in the industry’s defences – whether that’s environmental, jurisdictional, or technological – and it is the role of the financial institutions compliance professional to close these gaps as much as possible.”
Peter Fisher, Financial Crimes Product Director, SymphonyAI Sensa-NetReveal
How many banks have an anti-money laundering strategy in place?
With human trafficking representing such an enormous part of the overall money laundering challenge, more financial institutions need to consider a better anti-money laundering strategy moving forward. However, almost a fifth (19%) of the FI professionals surveyed globally currently still do not have a strategy in place to combat the most heinous money laundering crimes. There is also a very real and present danger that COVID-19 will get in the way and provide a major setback. Three in four (72%) responded that COVID-19 has impacted their approach to tracking and stopping money laundering and has dramatically impacted their ability to spend in the short term. 43% of banks and insurers also stated that they want and need better technology as part of their five-year strategy to combat money laundering.
Other stats include:
Top 10 money laundering offenses of most concern to financial services professionals
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- Fraud
- Corruption
- Participation in organised crime
- Cybercrime
- Terrorism
- Illicit trafficking in narcotic drugs
- Tax crimes relating to direct and indirect taxes
- Trafficking in human beings and migrant smuggling
- Insider trading and market manipulation
- Piracy
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Top 10 biggest financial impact on financial institutions
- Fraud
- Corruption
- Trafficking in human beings and migrant smuggling
- Terrorism
- Participation in organised crime
- Illicit trafficking in narcotic drugs
- Illicit trafficking in stolen goods
- Sexual exploitation
- Piracy
- Counterfeiting of currency
Top 10 money laundering concerns for financial services professionals
- Impact on image of industry
- Personal/professional reputational damage
- Innocent customers are being defrauded
- Financial cost to business
- Its impact on our own corporate reputation
- The human cost of the criminal activities
- Our difficulty to stop illegal transactions
- Inadvertent contribution to criminal activity
- Difficulty in identifying it
- Difficulty to prevent it happening
The state of money laundering – according to financial services professionals
- 89% are concerned about money laundering
- 61% admit it’s hard to uncover evidence of human trafficking through financial transactions
- 1-in-3 complain that too few suspicious activity reports result in justice
- Over 1/2 want to help protect society from financial crime
- One-in-five say they don’t have an anti-money laundering strategy in place
- 43% agree they need better technology to help
- 44% intend to invest in more people
- 72% have had their AML approach impacted by COVID-19
The state of money laundering – according to consumers
- Over 1/2 are aware of and concerned about money laundering
- 3-in-4 want FIs to be more transparent about money laundering
- 84% agree FIs should demonstrate conscience through good ethical practices
- 3/4 would leave for another provider if they suffered a series of illegal transactions
Global comparisons
- 9 in 10 (90%) of FIs in Australia said that COVID-19 has impacted their anti-money laundering technology investments, against a global average of 72%
- 69% of FIs in the US said that they have had to investigate transactions linked to human trafficking, much higher than other reported markets
- A third (34%) of UK FIs stated a lack of anti-money laundering support from law enforcement
