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, from victims of the drug wars in Mexico, to child labour in many parts of the world, the human cost of financial crime is very real. And it’s a global phenomenon.
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. Financial crime is the people washing your car in a supermarket car park and keeping none of their wages; it is the person painting your nails as you get ready for a Christmas party, who is then forced to hand all their takings to a landlord.
Corruption and financial crime are not new; they have been a feature of society for millennia, since the concept of money first developed. What is new is the sophistication of financial criminals and their ability to use technology to facilitate money laundering. We are witnessing the rise of ‘crimetech’ as criminals harness the latest technologies to beat the system and power international criminal networks.
Every year, an estimated $2.4 trillion in proceeds from activities such as forced prostitution, terrorism, and drug trafficking will be laundered through the world’s financial markets and banking systems. Currently, only a very small amount of this activity is detected in the global financial system.
In 2011, a United Nations Office on Drugs and Crime report estimated that less than 1% of criminal funds flowing through these systems every year are believed to be frozen and confiscated by law enforcement. Move forward six years and we would expect to find a similarly low percentage.
Banks, financial services companies and public institutions are in the vanguard of fighting this crime. But with the rise of crimetech, they need ever-more sophisticated tools to monitor and track criminals and the transactions they undertake.
That is why it is so crucial to use all the tools at our disposal to step up the fight against financial crime. One of these tools is data.
Big Data gets a lot of attention these days, whether it is scrutiny over what data is being collected, or ways it can help businesses and the economy grow. But it is also at the heart of today’s conflicts. Data is the twenty-first century arms race. As the old adage goes, information is power, but we’re perhaps only now really beginning to see its full implications.
The amount of data in the world is proliferating at an astonishing rate and detecting signals in the noise can be a significant challenge. This includes determining whether the data and its provenance is reliable, how to collate it, how to ensure it is up to date and how to transform it into something that provides valuable insight.
Technological advances can help connect the dots and do it quickly, so that we can spot the patterns that are evidence of crime and prevent malicious activity from happening in the first place. Big data analytics can already use structured and unstructured raw data from different sources, such as geolocation data, and those from mobile devices and social media, to detect fraudulent activities, unearth hidden connections between accounts, and track the relationship between sources and the beneficiary.
But it is also imperative that public and private sector organizations work in partnership with each other to develop strategies for the exchange of data and information sharing across borders to really make an impact on the global networks behind financial crime and the untold societal harm it can bring.
In order to address some of these issues, more than 20 countries have committed to developing public-private financial information-sharing partnerships (FISPs) that bring law enforcement and other public agencies together with groups of major financial institutions to tackle money-laundering and terrorist-financing risks more effectively. We need more of them.
Tackling financial crime is near the top of every policymaker’s agenda. If we can successfully challenge illegal financial dealings, we can also tackle many societal issues. But even with the best intentions, we need to recognize that with regulation we are often only scratching the surface of the problem. Members of the financial services community need to take personal responsibility to go above and beyond the call of duty.
Technology is an enabler of crime as its perpetrators become ever more sophisticated and move increasingly online. But it can also be one of the most powerful tools that we have to fight it. Only by working together and harnessing technology can private and public institutions really hope to take the fight to the child traffickers, drug cartels and prostitution rings, and hope to win it.