Posted: 23 Feb. 2021 5 min. read

Bringing economic crime to justice

Why organised crime demands an organised response


Economic crime creates an immense and unacceptable financial and human cost to society. A cost that we cannot, and should not, bear.

Historically, public and private sectors have largely tackled the threat independently. Although there have been some excellent examples of partnership working, strategic system-wide collaboration has been absent. The sheer size and complexity of the regime seems to act as an inhibitor to change.

However, the time has now come for this to change. Only by working collectively – operating as a single, coordinated system - can we effectively fight economic crime. Only together can we change how it’s perceived, opposed and prevented. Read on to discover how…

The human and financial cost of failure

In some quarters of society, economic crime isn’t perceived as ‘real’ crime: ‘No one gets hurt,’ goes the argument. ‘The only victims are the big players – the banks, the governments, the corporates – who take too much from us already, and they can well afford it’.

Unfortunately, the argument is flawed. Lots of people get hurt. Usually the most vulnerable. And in these challenging times, neither the public sector nor the private sector can afford the cost of economic crime. It is a major threat to the security and prosperity of the UK, negatively affecting all aspects of society, business and government.

In 2019 alone there were over 3.7m incidents of fraud. It now impacts one in 15 UK citizens a year (source: Crime Survey for England and Wales).

Bribery and corruption undermine institutions, fair competition and economic growth. Just think what that means for jobs.

And the consequences of money laundering are brutal, cruel and often fatal. It enables criminals to profit from the most heinous crimes, including human trafficking, modern slavery and illegal drugs, as well as financing terrorist atrocities.   

"Illicit finance is the golden thread that runs through virtually all serious and organised crime"

Ben Wallace, UK Minister for Security, 2016-19, UK Secretary of State for Defence, 2019-Present
 

Organised crime beats a disorganised system

Thanks to an increasingly interconnected, digital world, organised crime gangs are continuously evolving their international operations, working across multiple jurisdictions. They act with a speed and sophistication with which the ‘system’ – by which we mean government, law enforcement, regulators, corporates and financial institutions, and the majority of which work in siloes – cannot keep pace.

No surprise then that our current uncoordinated ‘system’ is struggling to bring these criminals to justice. And because it is failing to work together as effectively as they are, we are all suffering the consequences: 

  • Less than 1% of the billions of pounds laundered annually are ever recovered (source: Global Initiative Against Transnational Organized Crime).
  • UK banks spend over £5bn a year on fraud and financial crime prevention (source: UK Finance), but recent government figures confirm that prosecutions for money laundering over the last 10 years have halved (source: Home Office).
  • The 2017 Annual Fraud Indicator estimates fraud losses to the UK at around £190 billion every year, with the private sector hit hardest losing around £140 billion. The public sector may be losing more than £40 billion and individuals around £7 billion

(source: National Crime Agency).

The regulated sectors have taken significant steps to protect customers and the economies in which they operate. Investment in people, processes and technology to monitor customer transactions for signs of risk has been huge, and regulatory pressure has been high. Despite this, it has proved extremely difficult to effectively stem the flow of illicit finance.

The word ‘flow’ here is appropriate. Like water, organised crime always takes the path of least resistance, quickly finding its way into the cracks. And a system is only as good as its weakest link. Which is why it’s vital that all UK system stakeholders collectively – and quickly – address their current weak spots.

The publication of the Government’s Economic Crime Plan in July 2019 has come as a timely and valuable platform from which to initiate such a joined-up approach. A springboard for a much-needed radical rethink about how we tackle the threat.  

"Through this plan, the full force of both the public and private sectors will be employed to reduce the impact of economic crime felt by so many and bring to justice those criminals who act with impunity. We are resolute in our mission to protect the security and prosperity of the UK and ensure that the UK does not become a safe haven for illicit finance. Delivering this response will ensure the UK is a world-leader in tackling economic crime."

UK Economic Crime Plan, July 2019
 

A new plan for a new system

The Economic Crime Plan recognises that the outcomes of the UK economic crime regime represent a collective strategic failure on the part of all players in the system.

Central to the plan is combining the capabilities and expertise of the public and private sectors to collaborate on a new, cross-system approach to address the rise of economic crime. This will not only “attract business to the UK” but also “protect our vulnerable people and communities”.

The UK is not alone in this. There’s widespread recognition across world markets of the need for system change and a rethink of the interplay between government as policy owner, regulators as protectors of that policy, financial services working with corporates as a key enabler and, of course,  law enforcement to put it all into effective practice. In this way it’s possible to harness the power of the whole system, ‘designing out’ the weak links and stemming the flow of crime.

Crucially, this requires a commitment from all parties to take an empowered proactive, stance rather than a defensive, reactive one: to own a common ambition and approach, effectively sharing intelligence on individuals and groups so criminals can be tackled swiftly.
 

Four steps to bring economic crime to justice

From our engagement across the economic crime regime, we believe there are four key steps which the ecosystem should take collectively in response to the threat.

1. Improve alignment

A greater alignment of ‘preventative’ effort across the public and private sector, concentrating on high-value activities, is paramount. This should include better sharing of information and intelligence, such as emerging typologies and tactical data sets, which would sharpen the regulated sector’s ability to identify suspicious activity. Anecdotally, some banks currently report that as little as 1% of transaction-monitoring alerts identify information that warrants reporting to national intelligence authorities. In some cases, to achieve this, legislative and regulatory frameworks must change and new mechanisms put in place.

2. Increase collaboration

The adage of ‘the whole is greater than the sum of its parts’ is certainly true of the economic crime regime.

This is particularly true when it comes to information and intelligence. There have been some successes across the regime, such as CIFAS (a not-for-profit fraud prevention membership organisation) providing a fraud intelligence sharing capability for its members. But the system can go much further, particularly in enabling banks to share ‘known suspicion’ financial crime intelligence, which has the potential to dramatically increase the ability of the financial system to tackle the threat.

Improved collaboration could also enable the public sector to leverage the capacity and capabilities of the private sector to help drive a more disruptive agenda and secure better outcomes. As an example, law enforcement could look to the approach taken by the US Department of Justice (DoJ). The DoJ has worked with the private sector for the best part of a decade, bringing in forensic accountants, open source intelligence analysts and more, which has enabled them to make a dramatic step-change in the seizure of criminal assets.

3. Embrace new technologies

The proliferation of emerging technologies, including new payment platforms, cryptocurrencies and Digital ID, represent an opening for the ecosystem to start “designing out” vulnerabilities – but at the same time, they represent opportunities for enterprising criminals to exploit.

Whilst the development of a central analysis capability which would bring together actors from across the system to define and disseminate a strategic response, might seem like a pipe dream, there are similar models out there. The Joint Terrorist Analysis Centre (JTAC) for example, functions as the brain which drives the entire Counter Terrorism system, and has had a huge impact on the national ability to respond to the threat.

4. Make broader connections

Economic crime doesn’t stop at financial services. A huge range of other sectors need to play a strong, active role within the ecosystem. This can be both socially responsible and be good for business: Social media needs to tackle the explosion in ‘romance fraud’, telcos are faced with threats such as smishing (where a fraudster attempts to obtain information from a customer through text message), and other sectors such as real estate must be alive to the risks of money laundering.

Additionally there are many arms of government – such as Companies House and Land Registry – where more coordination and collaboration could help best defend the system.

The role for Whitehall is to lead on the strategic engagement with individual organisations and industry bodies, building their commitment to the cause – and work with law enforcement to translate those relationships into effective operational activity.

The challenge is significant requiring cultural and regulatory reform, but from our experience of working with organisations across the ecosystem, we know that everyone involved wants the same outcome – to prevent crime, protect citizens and customers, and disrupt the criminals. The task, for leaders in both government and industry, is to harness this shared ambition and go on the transformation journey together.

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Key contacts

Chris Bostock

Chris Bostock

Director

Chris is a Director in the Financial Crime team within Deloitte's Forensic practice. He has over 15 years’ experience in intelligence, investigation, policy, and partner support roles within national law enforcement agencies. Chris has worked extensively with overseas law enforcement, industry and regulators to deliver operational objectives and build capability.

Tim Newman

Tim Newman

Director

Tim supports organisations across the Economic Crime regime, including policy makers, regulators, private sector and law enforcement. He works with them to design whole-system solutions, focusing on the disruption of criminal activity, illicit financial flows and the protection of the vulnerable from exploitation. He is an expert in operating model design; translating strategy into a blueprint for the future, creating a business case for change and structuring programmes of transformation.