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Perspective:
Perspective
09 Dec 2021
5 minute read

New developments in the global effort against financial crime

It’s a trillion dollar industry and not getting smaller – financial crime is a big issue, and globally, a lot of money is spent trying to stop it. But how effective are these efforts? What more needs to be done?

Lisa Dobbin
Chris Cass

More about the authors

Lisa Dobbin

Deloitte - Australia
Lisa leads Deloitte’s Australian and Asia Pacific Financial Crime practices. She specialises in the provision of financial crime consulting services to clients in the financial services industry. Lisa’s experience includes financial crime transformation programs, regulatory response (including AML/CTF civil penalty proceedings and enforceable undertakings), remediation, regulatory change, technology advisory and independent reviews/inspections. She has supported clients domestically and offshore and has worked with a range of clients across banking, wealth management and insurance. With experience across both the investigative and advisory aspects, Lisa has advised clients on all financial crime themes (AML/CTF, sanctions, anti-bribery and corruption, market misconduct, fraud). Lisa has a background in engineering and delivering major regulatory projects and enhancing operational frameworks at major financial institutions. She was formerly a lawyer specialising in contentious financial crime and regulatory matters.
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Chris Cass

Deloitte - Australia
Chris is a Fellow Chartered Accountant and has over 28 years advisory experience, primarily in the financial services and gaming sectors on reputational issues including regulatory investigations, economic and trade sanctions, AML/CTF, fraud, insider trading, bribery and corruption, operational and system failure. Chris’ experience, which spans commercial, regulatory, law enforcement and professional services’ organisations, enables him to bring extensive and diverse experience to his professional life. Chris spent a decade in the United Kingdom as a senior forensic accountant with leading regulatory and law enforcement agencies, including the Financial Services Authority and Serious Fraud Office. He has worked in Australia for 20 years providing financial crime and regulatory advisory services to a large number of leading domestic and global financial service institutions. In 2016, he was appointed as an expert witness in the AUSTRAC civil proceedings against Tabcorp Holdings.
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How effective are global anti-money laundering efforts?  

Financial crime, including the laundering of its proceeds, represents an immense and unacceptable human and financial cost to society1. The prevention of money laundering has long been a focus of the international law enforcement community.

Anti-money laundering (AML) reform has come a long way2 since the formation of the Financial Action Task Force (FATF) in 1988, most significantly the decision in 20133 to assess the effectiveness of AML regimes, rather than purely looking at technical compliance. This change required member countries to prove how they were identifying and preventing money laundering.

Even before FATF changed its evaluation of AML regimes, an increasing number of voices4 were calling for better outcomes given the growth in resource and fiscal demands year-on-year. Key concerns include that the suspicious transaction reports are not diminishing and recovery of proceeds of crime remains low. 

Identifying and highlighting global change and learnings

A number of countries are taking steps to modernise financial crime risk management frameworks, recognising that effective outcomes require change across the regime, including structural, legal, and technological shifts along with intelligence sharing protocols.

Below are the key trends driving the modernisation of financial crime risk management. Some are likely to be considered as part of the ongoing Australian Senate Committee Inquiry into the adequacy of the Australian AML/CTF regime, which is due to report in March 20225, but others will require sustained political leadership to achieve.

With the United Kingdom and the United States leading the way, governments are increasingly legislating or mandating common frameworks for all stakeholders in the AML regime. The Economic Crime Plan6 created in 2019 by the UK Home Office was designed to encourage the private and public sectors to share risk-based intelligence. By defining whole-of-regime success criteria and encouraging stakeholders to collaborate and share risk intelligence, the UK Government has sought to promote success at all levels. This is a significant departure from the status quo in most countries, where stakeholders in an AML regime have traditionally had discreet and largely siloed roles, including:

  • the regulated sector, collecting ML/TF risk intelligence from its commercial operations and customers;
  • the Financial Intelligence Unit collating financial intelligence for law enforcement and other agencies;
  • andLaw enforcement, investigating financial crimes and supporting prosecuting bodies.

A collaborative approach, supported by legal frameworks, promotes collective focus and resourcing on shared goals and enables capabilities, particularly those developed in the private sector, to be flexed according to national priority across the regime. This approach will deliver stronger intelligence to be shared and scaled at a regime level, improving the impact of ongoing identification and management of risk.

Some jurisdictions are legislating or arranging for the definition of strategic priorities for the AML regime.

For instance, the US AMLA7 now requires The Financial Crimes Enforcement Network (FinCEN) to establish national AML/CFT priorities for FIs to incorporate into their AML/CFT programs, and for regulators and examiners to incorporate into rules, guidance, and examinations.On 30 June 2021, FinCEN issued the first government-wide national AML/CFT priorities. The setting of national priorities is a significant shift of focus for US regulators.

A national focus on risk priorities, ideally aligned with a national risk assessment, allows a targeted approach by all regime participants aligned with national priorities.AML law and regulatory guidance seeks risk-based outcomes, and by defining priorities, reporting entities can prioritise risk management effort.

Regulators are increasingly promoting the use of innovative technology into AML laws and regulatory guidance to achieve improved risk intelligence, recognising the increased volume and complexity of transactions to be monitored. Some governments are seeking the data analytics capabilities of the private sector to be leveraged across the regime to improve risk-based outcomes. A combination of public to private and private to private initiatives designed to run collaborative analytics are gaining traction in many jurisdictions.

What does this mean for Australia?

Australia has a strong track record in global AML developments and continues to promote innovation in the regulated sector and in its flagship public private partnership, the FINTEL Alliance. There is an opportunity for the Australian government to consider a singular defined plan or strategy for financial or economic crime that will lead to broader collaboration, more efficient use of resources and greater confidence in investments. 

With strong government leadership, Australia can do more to disrupt financial crime by taking a proactive, collaborative and outcomes-focused approach to tackling financial crime, a business and societal imperative. 

This article draws from The effectiveness of financial crime risk management reform and next steps on a global basis, a report produced by Deloitte and the Institute for International Finance.  

1  ‘Revealing the true cost of financial crime’, REFINITIV, 2018. Viewed on 11 Nov. 2021, https://www.refinitiv.com/en/resources/special-report/true-cost-of-financial-crime-global
2 ‘FATF Members and Observers’, FATF-GAFI, Viewed on 11 Nov. 21, https://www.fatf-gafi.org/about/membersandobservers/
3 Bjørn S. Aamo, 'Effectiveness has moved to the top of the FATF agenda', FATF-GAFI, 21 Mar 2013, viewed on 11 Nov. 2021, http://www.fatf-gafi.org/publications/fatfgeneral/documents/effectivenesshasmovedtothetopofthefatfagenda.html
4 'The war against money-laundering is being lost', in The Economist. 17th April 2021 edition, viewed on 11 Nov. 2021, https://www.economist.com/finance-and-economics/2021/04/12/the-war-against-money-laundering-is-being-lost
5 'The adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime', Senate Legal and Constitutional Affairs Committee. Viewed on 11 Nov. 2021, https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Legal_and_Constitutional_Affairs/AUSTRAC
6 'Economic crime plan 2019 to 2022', HM Treasury and Home Office. 12 July 2019, viewed on 11 Nov. 2021, https://www.gov.uk/government/publications/economic-crime-plan-2019-to-2022
7 Section 6002(4) of the AML Act of 2020, Division F of the National Defense Authorization Act for Fiscal Year 2021, Pub. L. 116-283. 01 Jan 2021, viewed on 11 Nov. 2021, https://www.congress.gov/bill/116th-congress/house-bill/6395/text

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