Up to USD 2 trillion are laundered globally every year. The stage of actions to prevent, detect and mitigate financial crime


Up to USD 2 trillion are laundered globally every year. The stage of actions to prevent, detect and mitigate financial crime at internatioal level. Which are the emerging risks?

20 May 2024

Opinion article by Burcin Atakan, Partner, Deloitte Romania, and Leader of Fraud Investigation Services, Deloite Central and Eastern Europe, and Laura Lică-Banu, Financial Advisory Director, Corporate Forensic Services – Financial Crime, Deloitte Romania

Recent crises have produced profound changes in all aspects of the business world, and the need for speed and flexibility of operations has added new categories of risks in the area of financial crime. Although significant strides have been made in recent years in reforming anti-money laundering standards and practices, international relevant bodies estimate that between USD 800 billion and 2 trillion are laundered globally every year, and the impact of financial crime is felt across all segments of society.

European and global reform

The new EU Anti-money laudering (AML) Regulation, soon to be adopted, is establishing a unified regulatory framework for preventing and countering money-laudering (AML) and countering financing of terrorism (CFT) directly applicable to the obliged entities. Notable amendments concern: additions to the list of obliged entities (luxury goods traders, professional football clubs and agents, crowdfunding); enhanced requirements for beneficial ownership and control; enhanced due diligence for high net-worth individuals, identification and verification for occasional transactions between EUR 3,000 and 10,000, cross-border access to bank account information; remote customer identification; EU-wide ban of cash payments above EUR 10,000; revised high risk third-countries policies. Also, the sixth AML Directive included in the same regulatory package will set up rules concerning: further establishment of information sharing mechanisms within the EU and the selection of entities that will fall within the supervisory ambit of the new central Anti-Money Laundering Authority; measures applicable to sectors exposed to money laundering and terrorist financing at national level; identification of money laundering and terrorist financing risks at EU and Member States level; access to beneficial ownership, bank account and real estate registers; responsibilities and tasks of the Financial Information Units (FIU) and of the supervisory authorities; cooperation between competent authorities and the one with the authorities covered by other EU acts.

The Financial Action Task Force (FATF) continues to prioritize setting up a globally consistent anti-financial crime framework, having reviewed the international AML/CFT standards in November 2023, and its methodology for assessment in June 2023. Based on the results of the fifth round of evaluation to which Romania took part as assessed country by Council of Europe - Moneyval Committee (FATF-style regional body), progress is expected to be made by both the Romanian authorities and regulated private sector on several areas, such as adopting a national AML/ CFT strategy ensuring a consistent approach and methodology in AML/ CFT across all areas, enhancing the countering terrorism financing policy and implementation mechanism, increased awareness in suspicious transactions detection and reporting, especially on the non-financial sectors, as well as the application of effective sanctions by the supervision authorities. On the other hand, the adoption of the new EU AML Package that will require legislative transposition, and the expected measures to be taken in Romania based on the Mutual Evaluation Report will also emulate a lot of actions in the upcoming period.

Recently, FATF, INTERPOL and United Nations Office for Drugs and Crime (UNODC) have also called for action on behalf of the member countries to identify illicit profits generated by cross-border organized crime, which facilitate conflict and finance terrorism, calling for strengthening public-private partnerships (PPP) and joint operative groups.

Emerging risks

The latest edition of the Global financial crime prevention, detection and mitigation report, issued by Deloitte in collaboration with the Institute of International Finance (IIF), also reviews a number of emerging risks related to cyber threats, non-cash fraud and other types of malfeasance abusing artificial intelligence tools. A relevant attention is also paid to regulating and oversight of virtual assets and virtual asset service providers, as AML obliged entities. In this context, the sixth new AML Directive shall include measures to address the risks posed by virtual currencies, and it requires providers of exchange services between virtual currencies and fiat currencies, and custodian wallet providers, to be registered and subject to AML/ CFT supervision. Also, the Crypto Travel Rule is included in the sixth new EU Directive and aims to increase transparency and prevent money laundering and terrorist financing in the virtual currency (or crypto) space.

Safeguarding the global payments system is also a key priority that needs to keep pace with innovation and regulatory developments. In this respect, the FATF Recommendation no. 16 on wire transfers reflects changes concerning ISO20022 in order to allow a more consistent interpretation and implementation of the standard and a more effective use in the fight against financial crime.

A unitary, coordinated response is also required by money laundering risks arising from attempts to breach applicable financial sanctions and export controls. The FATF has developed standards for jurisdictions to identify and assess the risks of potential non-implementation or evasion of the WMD (weapon of mass destruction) financing proliferation - related targeted financial sanctions, and to take action to mitigate those risks. The newly adopted EU Directive 2024/1226 also aims to harmonize the EU member states’ approach to investigating, prosecuting, and penalizing international sanctions violations, as serious criminal offence.

As a conclusion, the risk-based approach is a fundamental principle for ensuring an effective framework for fighting financial crime, and understanding the fight against money laundering and terrorist financing at national, sectoral and organizational level, as well as in relation to the global framework, is essential. Thus, keeping clear and complete data on customers, their activities and transactions, as well as on the products or services, distribution channels and geographical areas involved, will significantly facilitate the exchange of information between obliged entities, supervisory and law enforcement authorities within public-private partnerships (PPP), platforms or communities at sectorial level.

Mere “technical” compliance or compliance to meet minimum regulatory requirements are not enough. Along with the rest of the member states, Romania is evaluated on the effectiveness of the whole system. Similarly, the organization is better protected when the compliance program exists not only at the procedural level, but also at the process and internal controls level.

The topics presented in this article will be extensively analyzed during the Symposium on Financial Crime in Central Europe, organized by Deloitte Romania on May 21, 2024, which brings together representatives from the relevant bodies, as well as specialists from the private sector, from both Romania and abroad.