It's important to remember that banks form only part of a greater money laundering network. Professional money launderers utilise a range of different professional services to move and integrate the proceeds of crime, from law firms to property agents to tax advisors and beyond, as Howard Cooper explains.
In order to effectively combat money laundering, these additional stakeholders need access to better information about the money laundering structures impacting them. There also needs to be effective education and more collaboration across the professional service provider, banking and supervisory landscape, especially in relation to enhanced data analytic capability.
Professional money laundering networks thrive because they can oversee the entire laundering structure from a single location, whereas those tasked with identifying and preventing money laundering only have a limited view. This is like giving someone an individual part of a jigsaw puzzle and asking them to say what they see. That person would be able to describe the individual piece they hold but could not possibly see how it fits into the entire picture.
Professional money laundering networks thrive because they can oversee the entire laundering structure from a single location, whereas those tasked with identifying and preventing money laundering only have a limited view."
Even relatively simple transactions demonstrate this issue. For example, when the proceeds of crime are transferred via bank transfers through corporate bank accounts, from one jurisdiction to another, before being used to acquire a property in an overseas jurisdiction. In this scenario:
- If you are the local or overseas bank receiving an application to set up a new bank account or receive or transfer funds for that client, there are limited external sources of information available to check that the information provided by the customer is accurate.
- If you are a correspondent bank facilitating the movement of funds across jurisdictions, there are limited sources of information available to check, other than the bank sending or receiving the funds.
- If you are the agent or legal advisor assisting with the acquisition of an asset, again a considerable amount of reliance needs to be placed on the information and documentation provided by the customer acquiring the asset.
In the above simple structure, none of the stakeholders can see the whole transaction. If any suspicions arise, they are reported through a Suspicious Activity Report (SAR). It is then the role of the Financial Intelligence Unit, which receives the SARs, to analyse the information and escalate where appropriate, but again only with the visibility over one, perhaps two pieces of the jigsaw.
It would be beneficial to create a structure in the UK (as a starting point) to enable more information sharing across the stakeholder group, so that fund flow patterns, particularly those across jurisdictions, could be analysed for common themes. This would undoubtedly result in better quality SARs, which in turn would improve the thematic analysis, and therefore, make it harder for the professional money laundering networks to continue to manipulate the system.
However, while this would surely benefit the UK's fight against the infiltration of the proceeds of crime into our financial system, it will only be better when jurisdictions themselves can proactively and expediently share information across borders. That is when the image that the combined parts of the jigsaw create will come into view.
Howard Cooper is managing director of business intelligence and investigations at Kroll, a division of Duff & Phelps
Individual holdings breach limits