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Financial watchdogs lack the powers they need to combat money laundering, conference told

By Dan Byrne

The world’s national financial intelligence units (FIUs) – intended to be watchdogs and safeguards against money laundering – lack key powers which they need to tackle the problem, according to one expert.

Federica Taccogna, Senior Managing Director at FTI consulting and financial crime specialist, criticised the inability of FIUs to approach money laundering on an international scale.

“Building and piecing together a laundered transaction is a huge undertaking,” she told the Dark Money conference Wednesday. “It may go from Azerbaijan, to Estonia, to the UK, to Malta… eventually to the US.”

“Individuals from all jurisdictions need to bring all pieces of this transaction together, but FIUs don’t have the power to do that. How are we ever going to win if we only see a narrow corner of the problem?” said Taccogna, a member of the Advisory Board here at AML Intelligence.  

It comes amid wider calls for the AML industry to become more globally organised in the face of international crime rings which are already at that level.

“There’s no predator for organised crime, which is why it runs free and does so much damage to democracy,” said Paul Radu, director of the Organised Crime and Corruption Reporting Project (OCCRP)

“Organised crime globalised a long time ago, and law enforcement hasn’t. It takes an integrated effort to fight and integrated business – which is what organised crime is.”

The global nature of financial crime received much publicity in the last week with the leak of the FinCEN files.

Huge swathes of data were released last Sunday, revealing multi-billion euro laundering trails through several financial centres across the world, all belonging to organised crime rings.

Also revealed was the apparent lack of action from banks or authorities to stop it.

“No sector has all the answers,” Radu advised. “There needs to be dialogue between financial industry, watchdogs – and journalists also, like those who worked on with the FinCEN files over the last year. Transparency is the key to all this.”

Among other criticisms raised at the 2020 Dark Money conference were the ease at which criminals can set up shell companies in some jurisdictions, and the lack of resources available to law enforcement as they try to tackle the problem.

“At the moment, law enforcement agencies are simply outgunned by criminals,” said Ben Cowdock. investigations lead at Transparency International UK.

“Criminals are willing to throw all their assets behind defending those assets, whereas law enforcement agencies are bound by strict budgets.”

He pointed to new UK regulations surrounding ‘unexplained wealth orders’.

These allow authorities to question the source of suspected criminal’s assets when their declared income suggests they could never have afforded it.

“The government expected 20 of these orders to be issued every year,” Cowdock said. “The real figure is a lot lower. These are expensive cases to bring forward. Criminals can afford it, but it’s a huge chunk of law enforcement budget.”

Taccogna, meanwhile, said that funding was as much an issue in the technology field.

Multiple new initiatives involving AI or similar systems are being developed to further revolutionise AML battle, but Taccogna says that these can cost money which law enforcement doesn’t have. “If I could change anything about AML, I would make high-tech systems much more available for law enforcement,” she said.

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