Chris Middleton presents the third exclusive report from the RegTech for AML Forum in London.
In the opening salvo of the day, delegates at the first RegTech for AML Forum were reminded of some sobering statistics. Only one percent of an estimated $4 trillion in losses to financial crime is recovered each year, demonstrating that current AML strategy is not working.
According to the United Nations Office on Drugs and Crime (UNODC), the $4 trillion annual proceeds from financial crime are equivalent to 3.6 percent of world GDP. Indeed, were ‘Crime Land’ a country, it would be the fifth largest economy on the planet, by International Monetary Fund projections for 2019.
Nearly two-thirds of that money is laundered by criminals: roughly $2.5 trillion, or 2.7 percent of global GDP.
Worldwide, just $40 billion of proceeds from all types of financial crime are recovered or seized by law enforcement agencies each year, including $25 billion of laundered funds.
According to a Reuters Financial crime report, institutions spent an average of three percent of annual turnover last year trying to prevent financial crime, via expenditure on cyber security, risk, auditing, anti-fraud, and AML initiatives. Despite these efforts, they lost an average of 3.5 percent of turnover.
The Association of Certified Fraud Examiners (ACFE) has estimated the losses even higher, at five percent of turnover.
Last year, the UK spent roughly $5 billion on compliance programmes, while the domestic banking sector filed nearly half a million suspicious activity reports (SARS), and yet there were almost no prosecutions: evidence that the fight against money laundering needs to be shifted away from quantity, and towards a more qualitative approach.
According to digital financial services provider Fenergo, fines of $26 billion have been levied over the last decade worldwide for AML or sanctions non-compliance. Ninety percent of those fines were in the US.
Delegates at the packed London conference heard some of the world’s leading anti-money-laundering, compliance, and financial security experts set out the challenges facing the banking system.
However, while insightful and innovative solutions were discussed – and banks’ desire to work together was apparent – the statistics reveal that there is a long way to go in the fight against money laundering and financial crime.
- With thanks to David Christie at bleckwen.ai for roundtable reporting.
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