By Niall Hearty

In the modern technological age, it is accepted that financial crime is cross-border in nature. 

The developments of recent years that have made online banking an everyday reality have bestowed on us the expectation that any transaction can be completed quickly and efficiently with the minimum of fuss and precious little bureaucracy. Unfortunately, such progress has been welcomed with equal enthusiasm by those looking to commit financial crime.

The ease with which honest members of society can manage their finances – both nationally and internationally – has also assisted those looking to move the proceeds of crimes ranging from bribery and corruption, tax evasion and fraud through to drug and people trafficking. The opportunities for money laundering – and the closely-associated terrorist financing – have developed at roughly the same rate as the advances in modern banking.

This raises a couple of thorny issues. The first is the challenge this poses for the authorities. It is often said that those who commit fraud are one step ahead of the authorities: as law enforcement agencies identify and prevent one type of fraud, those who perpetrate it already have a Plan B in place that they can move on to. In banking, the situation is not identical but there are similarities.

As law enforcement agencies, regulators or even the financial institutions themselves recognise that those behind financial crime are using the banking system in a certain way, it is highly likely that those people will start to move their illicit gains via different routes or methods. This often leaves the powers that be playing a high-stakes version of whack-a-mole as they try and keep tabs on how the banking network is being used to support criminal activity.

The second issue is the banks themselves. Nobody could accuse banks – in the overwhelming majority of cases – of not doing what they can to prevent their facilities being used for criminal purposes. It is, after all, in their interests to do so. Yet they are often hampered by a lack of resources and / or an approach that is at odds with those practised by their counterparts. It is also the case that they are obliged to comply with national anti-money laundering regulations. Such regulations are often focused on the risks and problems within that nation’s borders – an idea that seems to be at odds with the increasingly-globalised nature of banking that everyone uses and accepts as the norm in 2023.

This may seem a harsh interpretation of the current state of affairs. But it is one that the International Monetary Fund (IMF) recognises. The IMF has been working with eight Nordic and Baltic countries – Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden – in an examination of the challenges posed by money laundering. To put it simply, the IMF’s findings state that tackling money laundering cannot be achieved by single nations working diligently. Countries, according to the IMF, must innovate together to find a solution. Any serious attempt to tackle the 

movement of the proceeds of crime across borders needs a united global undertaking, with national regulators making more effort to both see the bigger picture and collaborate closely with their counterparts around the world.

These two points may seem contentious to some. There will be many who feel the efforts being made to tackle criminal use of the banking network are far more sophisticated than a fairground game. This may well be true – but the effect appears to be the same. And while regulators in many countries may feel they are doing all they can, the evidence shows that there is a need to do more – or do it differently.

On the plus side, there have been steps taken regarding the collection and analysis of cross-border transaction data. The technology that I have referred to also has the potential to help combat the criminal use of banking. In a world where bank customers now find moving money to and from anywhere in the world a seamless activity, those who are responsible for banking’s integrity need to do all they can to stop their global approach to crime being disjointed.

About the Author

khofizNiall Hearty is a Partner at Rahman Ravelli.

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