In the digital age, the immense scale of multi-layered global trade chains – and the many legitimate trading processes and structures these allow – provide a number of ways for trade-based money laundering (TBML) fraud to be carried out by criminals.
With organised crimes costing the UK at least £24 billion a year, according to the Home Office, it’s a worry that corporates need to heed.
TBML covers the wide range of intricate and complicated schemes used by criminals to disguise the origins of their money and integrate it into the legitimate economy.
‘Transnational crime is worth up to £1.5 trillion a year, with the value of global TBML being estimated at hundreds of billions,’ according to Romila Chowdhury, global strategic intelligence lead at Barclays Financial Intelligence Unit.
TBML is now a major concern for governments globally.
The UK recently hosted the first annual anti-corruption summit. World leaders, law enforcement agencies and businesses gathered to discuss ways to find new and more effective ways to tackle the challenges.
Azizur Rahman, senior partner at corporate fraud solicitors Rahman Ravelli comments, ‘Economic crime is ever-evolving as new technologies bring new opportunities and create a complex web for criminals to hide behind. At the same time, the regulatory landscape is also changing; bringing with it numerous challenges that can potentially make things even more complicated for businesses that want to protect themselves from such activity.’
How trade-based money laundering can affect your business
A global economic crime survey by PwC looked into the effect of TBML on businesses and organisations and noted that ‘the onus is now squarely on the shoulders of the business community to protect itself, and its stakeholders, from economic crime.’
In the financial services sector alone it finds:
– One in five had experienced enforcement actions by regulators
– More than 25 per cent were yet to conduct risk assessments across their entire global footprint
– 33 per cent cited issues with data quality that led to only 50 per cent of TBML incidents triggering security alerts
Imran Farooqi, partner at PwC, adds, ‘But it’s not just financial services institutions. Any organisation that facilitates financial transactions – including non-bank money service businesses such as digital/mobile payment services, life insurers and retailers, to name a few – is also coming within the scope of anti-money laundering legislation worldwide.’
Using technology to protect your business
At the top end of the scale, anti-money laundering programmes offer businesses a suite of services and technology that allow you to apply strict customer identification verification and implement automated transaction-monitoring policies and procedures. These digital detectives search for ‘eDNA’ behind transactions and highlight any suspicious signs of criminal fingerprints that are found.
At a simpler level, there are more manual ways to use technology that allow businesses to check for signs of TBML.
– Conducting internet searches if transactions arouse suspicion.
– Your buyer should have an online profile of some form if they are legitimate
– Online news alerts may raise doubts – suspicious shell companies have often been reported on previously in high-profile financial crime cases
– Online street views and maps may reveal inappropriate looking locations
– Setting up automatic alerts to flag unusual transactions.
– From jurisdictions known to be high risk
– Exceeding your expected levels
– Carrying unusual client profiles
– Involving high degrees of complexity
– With invoice and payment details that do not match
TBML: the price of inactivity is just too high to ignore
A passive approach to detecting and preventing economic crime is not enough. The costs are just too high.
Julian Dixon, CEO of anti-money laundering specialist Fortytwo Data, says, ‘The tentacles of anti-money laundering regulations are reaching deeper into more industries than ever before. Estate agents and casinos are two sectors facing more stringent requirements, thanks to the latest EU money laundering directives. The importance of these checks on your clients should not to be understated and suspicious activity identified in one company can lead to the dismantling of entire criminal networks.’
Legislative and regulatory changes have made it abundantly clear that the responsibility for preventing, protecting and responding to economic crime rests firmly with businesses and organisations.
Put simply, trade-based money laundering fraud can cost you your reputation, your finances and so much more.