2 Trillion Reasons Money Laundering Should Make You Worry

Anti-Money Laundering
Anti-Money Laundering

Any finance professional losing sleep over worries about money laundering is on the right track.

The prevalence of criminal and terrorist laundering activity combined with the rapid and ongoing technological transformation of the financial infrastructure has created a global system that never sleeps, and in which what some call “megabyte money” can move around the world easily and with lightning speed. That makes the Three Fs of dirty money — finding, freezing and forfeiture – all the more urgent, and all the more challenging.

Add to that all the other possible avenues for suspicious activity and financial crime – as well as the ever-evolving government regulatory strictures bankers must comply with – and it’s no wonder they face some sleepless nights.

Just consider how enormous the money laundering problem alone is. While its very nature means that much of it goes undetected, estimates from the International Monetary Fund and the United Nations Office on Drugs and Crime (UNODC) place the amount of money laundered globally in one year at between $800 billion and $2 trillion in current US dollars. To put that another way, the estimated amount of money laundered worldwide in one year is 2 – 5% of global GDP.

That’s a large range, of course, and the numbers are necessarily inexact. The intergovernmental Financial Action Task Force (FATF), for one, urges caution in taking even the highly informed estimates of agencies such as the IMF and UNODC as gospel. After all, it can be fairly presumed that even the most sophisticated analyses of money laundering ultimately require extrapolation and best guesses.

Even so, no one suggests that the estimates are significantly overstating the problem, given how much dirty money clearly makes its way back to the legitimate economy. Whatever the actual number is from year to year, it’s enormous, and cause enough for unwavering concern.

It’s what you don’t know that can hurt you the most

Given the scale of money laundering and the even larger category of suspicious activity into which it falls (along with the steep prices institutions find themselves facing when monitoring and compliance come up short), effective suspicious activity monitoring has become increasingly urgent.

At the same time, as the UNODC has noted, the task has been complicated not only by changing technology that opens new doors for enterprising criminals and terrorists, but by other factors as well. UNODC counts developments such as the “dollarization” of black markets (the increased use of US dollars in transactions), a “trend towards financial deregulation,” and the “proliferation of financial secrecy havens” among those factors.

Facing such pressures, industry leaders are seeking, and finding, integrated solutions grounded in technological innovations that enable them to break down traditional risk areas such as siloed data and disparate systems in order to gain a 360-degree view of operations and potential threats.

A number of Suspicious Activity Monitoring (SAM) and Anti-Money Laundering (AML) solutions are those developed by NICE Actimize, the largest and broadest provider of a single financial crime, risk and compliance software platform for the financial services industry. The NICE system is notable for it’s holistic approach to transaction monitoring, integrating functions such as detection, scoring, alerting, workflow processing, and reporting of suspicious activity.

With effective monitoring, crime really doesn’t pay

As challenging as it is to uncover and respond to money laundering and other suspicious activity, it’s also indisputable that today’s cutting-edge solutions are making a significant difference in the ongoing quest to thwart the bad guys.

The proof comes in the form of increasingly regular arrests of players in the realms of both traditional organized crime and terrorist organizations for often dramatic, large-scale crimes. That includes the recent break-up of what Europol identified as a multi-national operation by Chinese and Spanish criminal syndicates that allegedly laundered at least 40 million Euros gained through smuggling, tax fraud and other crimes, according to an announcement on the law enforcement agency’s website.

In another recent case, the US Drug Enforcement Agency announced arrests in a collaboration that linked Hezbollah and South American drug cartel operatives. According to the DEA, the joint venture involved funneling drug profits to Hezbollah, which kept some of the money to support “a weapons stream” and laundered the rest before returning it to the cartel.

The common denominator in these success stories and countless others, of course, is the emerging availability of the state-of-the-art SAM and AML tools that not only detect suspicious activity and monitor it, but also support the full investigation cycle.

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