The State of Financial Crime 2021 the State of Financial Crime 2021 Technology, Regulation, and the Future of Financial Crime Compliance

Total Page:16

File Type:pdf, Size:1020Kb

The State of Financial Crime 2021 the State of Financial Crime 2021 Technology, Regulation, and the Future of Financial Crime Compliance ComplyAdvantage The State of Financial Crime 2021 The State of Financial Crime 2021 Technology, regulation, and the future of financial crime compliance 1 ComplyAdvantage The State of Financial Crime 2021 Contents 01 Executive Summary 3 02 Introduction 4 03 COVID-19 & Digitization 5 04 Spotlight on Financial Crime 7 FinCEN Files 7 Convergence between Fraud, Cybercrime & Money Laundering 9 Sanctions 11 Crypto and Virtual Assets Service Providers (VASPs) 13 Terrorist Financing 15 05 Trends in Geopolitics & Impact on Financial Crime 16 Impact of Biden Election 16 Tensions between the West and Russia 17 Brexit 18 The rise of China 20 Political Unrest and OCGs 22 06 Regulatory Change and Enforcement 24 Global 25 North America 26 Europe 28 Asia - Pacific 30 07 Industry Trends 32 08 Key Dates in 2021 35 2 ComplyAdvantage The State of Financial Crime 2021 01 Executive Summary COVID-19 & Digitization Takeaway The shift to a digital world is creating many Firms should update their risk enterprise-wide opportunities, like authorized push payment fraud, assessments to take account of digitization trends and that can be exploited by criminals. identify ways to keep employees connected and motivated. Spotlight on Financial Crime Takeaway Financial crime developments will range from addressing Firms will need to ensure that they have robust, flexible, insights revealed by the leak of the ‘FinCEN files’ in the and integrated screening and monitoring systems in US, to the convergence of fraud, cyber, and money place to navigate the complexities of different types of laundering, the rise of crypto, and the ever-changing financial crimes. sanctions landscape. Trends in geopolitics & Impact on Financial Crime Takeaway Firms should follow global trends as part of their horizon Geopolitical events in the world can disrupt businesses scanning activities and be prepared to quickly update and reshape illicit finance operations, creating new AML/CFT policies, processes, and procedures to ensure criminal ventures and regulatory requirements that that they remain on the right side of the law. firms must identify and manage as part of their AML/CFT programs. Regulatory Change and Enforcement Takeaway A plethora of regulatory changes will take place In addition to incorporating regulatory changes into AML/ as governments seek to respond to new financial CFT programs, firms will need to ensure that they support technologies, such as Virtual Assets, and promote their assurance and audit functions in identifying and the use of technology to tackle financial crime which addressing potential regulatory issues. raises regulatory expectations and leads to stronger enforcement. Industry Trends Takeaway RegTech adoption, COVID-19 linked crime, the rise of Firms should be ready to address new threats, engage crypto, and the creation of innovative solutions through in cross-industry dialogue and seize opportunities to public-private sector collaboration are some of the innovate as industry trends change quickly. trends to be on the lookout for. 3 ComplyAdvantage The State of Financial Crime 2021 02 Introduction Welcome to ComplyAdvantage’s outlook for In 2021, firms will face many challenges. Fraud, cyber, 2021, a year that will continue to contend and money laundering will continue to converge as criminals exploit grand-scale digital adoption through with the fallout of the Covid-19 pandemic and computer and mobile-enabled crime. Geopolitics, anti-money laundering data leaks. particularly the 2020 US election, Brexit, the destabilizing effects of Russia, the rise of China, and Compliance has always been challenging. Compliance political unrest, will change how criminal networks officers have to educate organizations on emerging operate and how countries use AML/CFT tools to threats, the implications of evolving regulations, and retaliate. Corruption will continue to become more the onslaught of criminal behavior while balancing their attractive as trillions of dollars channel through the organizations’ risk appetite. Meanwhile, the monitoring international system via economic stimulus measures, and reporting of suspicious activity place organizations but also to support the delivery of vaccines. on the frontline of managing financial crime risks on behalf of governments. Against this backdrop, lawmakers, particularly in the US and European Union, have pledged to make the Last year proved to be a difficult year as Covid-19 AML/CFT frameworks more effective and have begun changed the way organizations worked. That, implementing the many legal and regulatory changes to compounded by regulatory divergence, the escalating do so. Hong Kong, Singapore, and the UK will further use of sanctions, and an increase in cybercrime and promote technological adoption and innovation. Brexit fraud activity, forced organizations and governments will affect how the EU and the UK work together, and to think critically about their anti-financial crime the UK will expand its autonomous sanctions regime. efforts. In the final months of 2020, ComplyAdvantage The Financial Action Task Force (FATF) will continue interviewed 600 C-suite and senior compliance decision to set the global AML/CFT agenda under the German makers across North America, Europe, and Asia-Pacific. Presidency, with the current President, Dr. Marcus The respondents represented enterprise banking, Pleyer, likely to encourage a more granular exploration investments, crypto, insurance organizations, and of the use of RegTech for AML/CFT purposes. FATF fintechs. Their answers dive deep into the challenges will also continue its country assessments in the organizations face and give us a glimpse at the trends ‘Fourth Round’ of mutual evaluations, driving further that are likely to emerge in 2021. A look at the numbers: enhancements in national frameworks as countries such as Pakistan seek to avoid the economic and political • SARs filing was on the rise with 74% of respondents consequences of remaining on the organization’s ‘grey saying they filed more SARs in 2020 than the previous list’ of countries with significant AML vulnerabilities. year • While several countries are in the process of Firms will need to embrace the risk-based approach to introducing critical updates to their AML regulations, manage finite resources against an onslaught of criminal only 19% of respondents felt that AML regulations activity; and as the Covid-19 pandemic unravels, firms needed to be strengthened will need to be more creative in monitoring, training, and motivating employees working from home. • 93% of respondents stated that real-time AML risk data would improve their compliance operations • Improving fraud detection ranked highest with 69% of respondents indicating fraud as a significant driver of financial crime in 2020 2021 will be a year of opportunity to innovate and learn how to use data and technology to support efforts to fight financial crime. 4 ComplyAdvantage The State of Financial Crime 2021 03 COVID-19 & Digitization Financial institutions reported that the top three things approved and released, organized crime groups (OCGs) Covid-19 put pressure on were: increased fraud cases, will try to steal vaccines, selling them at profit or simply risk appetite, and operational processes. This is likely selling fake variations. The Financial Action Task Force to continue into 2021 as the world continues to cope (FATF) warned of numerous Covid-19-related risks with the pandemic and embrace technological adoption. including fraud, cybercrime, exploitation of economic In 2020, G20 countries committed to spending stimulus measures, and Virtual Assets Service Providers US$21 billion, injecting US$11 trillion into the global (VASPs) laundering the proceeds of the sale of Covid-19 economy, and releasing US$14 billion in liquidity to vaccines. allow indebted countries to fight the pandemic. The astronomical amounts of public funds flowing through The shift to remote working and national lockdowns has the international financial system have created a honey led to the quick adoption of e-commerce and digital and pot for criminals and corrupt actors. Governments will instant payments, leading to cash displacement in many continue to walk the fine line between making funds and jurisdictions and disrupting criminal payment corridors. support available to vulnerable individuals, companies, Before the pandemic, digital payments growth was and countries at pace while putting in place measures to estimated at 12.7% and expected to produce 726 billion tackle fraud and financial crime in a frictionless manner. transactions annually in 2020, with an estimated 60% of world GDP digitized by 2022. This now appears to be Economic stimulus measures, aid funding, investments an underestimate. Tokenized payments and crypto assets into health infrastructure, and the development and will increase and more Central Banks will pilot the use distribution of Covid-19 vaccines were vulnerable in of digital currencies. All of these changes will speed up 2020 and will remain vulnerable to criminals in 2021. the adoption of non-face-to-face automated customer Interpol has warned that as Covid-19 vaccines are onboarding and digital ID. 5 ComplyAdvantage The State of Financial Crime 2021 These changes will also have a major impact on firms’ As criminals exploit home working arrangements, firms ability to monitor transactions. Legacy monitoring will continue to face challenges in managing financial systems, often based on relatively inflexible rules, will crime risks while
Recommended publications
  • Case 1:19-Cr-00064-GHW Document 82 Filed 10/26/20 Page 1 of 33
    Case 1:19-cr-00064-GHW Document 82 Filed 10/26/20 Page 1 of 33 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x : UNITED STATES OF AMERICA : : - v. - : 19 Cr. 64 (GHW) : NATALIE MAYFLOWER SOURS EDWARDS, : a/k/a “Natalie Sours,” : a/k/a “Natalie May Edwards,” : a/k/a “May Edwards,” : : Defendant. : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x THE GOVERNMENT’S SENTENCING MEMORANDUM AUDREY STRAUSS Acting United States Attorney Southern District of New York Kimberly J. Ravener Daniel C. Richenthal Assistant United States Attorneys - Of Counsel - Case 1:19-cr-00064-GHW Document 82 Filed 10/26/20 Page 2 of 33 TABLE OF CONTENTS PRELIMINARY STATEMENT .............................................................................................. 1 BACKGROUND..................................................................................................................... 2 I. The Offense ...................................................................................................................... 2 A. The Defendant, FinCEN, and an Overview of Her Offense ............................................ 2 B. The Defendant’s Initial Communications with Reporter-1 and Her Unsubstantiated Complaints Concerning FinCEN .................................................................................. 4 C. The Defendant’s Unrelated Sharing of SARs with Reporter-1 ........................................ 6 D. The Defendant’s Running
    [Show full text]
  • Fincen Files and Professionals of Integrity
    10/1/2020 FinCEN Files and Professionals of Integrity Hello all, Last month saw the latest leak of documents to reveal the vast scale of money laundering enabled by banks and regulators throughout the world. Following the Panama and Paradise Papers, and the Lux and Luanda Leaks, the FinCEN Files once again shed light on how the global elite have been able to move vast sums of dirty money around the world, highlighting how some of the biggest banks and nancial institutions have continued to allow suspicious transactions to take place. At the heart of the FinCEN scandal is the leak of more than 2000 so-called Suspicious Activity Reports (SARs) led with the US Treasury Department’s Financial Crimes Enforcement Network. Details of these les and their links with illegal activities will doubtless continue to emerge in the coming weeks and months, but the initial information highlights not just the role of nancial institutions, but also - as Oliver https://mailchi.mp/globalintegrity/fincen-files-and-professionals-of-integrity-2503638 1/9 10/1/2020 FinCEN Files and Professionals of Integrity Bullough has pointed out in his Oligarchy newsletter - the signal failure of western politicians to properly resource investigators and prosecutors to act on the SARs. The FinCEN Files' revelations serve to underline the relevance of the focus on this month’s newsletter: promoting integrity in professional elds, as well as one of the key GI-ACE themes on international architecture, which includes Jackie Harvey's recent piece on practical research on benecial ownership. Thank you, Paul Heywood, Director of GI-ACE https://mailchi.mp/globalintegrity/fincen-files-and-professionals-of-integrity-2503638 2/9 10/1/2020 FinCEN Files and Professionals of Integrity Cities of Integrity: Building Integrity in Urban Planners Our Cities of Integrity research team closed off this year’s Southern Africa City Studies Conference by bringing together leading voices on the topic of corruption and the desire for integrity in South Africa's local governance sphere.
    [Show full text]
  • Tom Burgis October 19Th, 2020 INTRODUCTION Tom Burgis Is an Investigations Correspondent at the Financial Times, Based in London
    Rise of a New Kleptocracy: How Dirty Money is Conquering the World | Tom Burgis October 19th, 2020 INTRODUCTION Tom Burgis is an investigations correspondent at the Financial Times, based in London. Previously, he was the paper's west Africa correspondent, based in Lagos, and Johannesburg correspondent. His latest book, “Kleptopia: How Dirty Money Is Conquering the World,” chronicles the world of dirty money and its complex web of criminals, money launderers, and politicians who enable it. The Washington Post calls it a “magisterial account of the money and violence behind the world’s most powerful dictatorships.” His book, "The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa's Wealth," was published in 2015. The New York Times called it a "brave, defiant book." Burgis won top prize for investigative reporting at the 2015 Society of Publishers in Asia awards and FT's Jones-Mauthner Memorial Prize in 2013, and was short-listed in 2015 for the European Press Prize and Young Journalist of the Year at the 2010 British Press Awards. Before joining the FT, he did a stint in Chile and traveled the world covering globalization and its discontents. WHY DO I CARE? Tom Burgis weaves together four stories that reveal a global web of corruption: the whistle blower from Basingstoke, England who stumbles on the secrets of a Swiss bank, an ex-Soviet billionaire building a private empire, the righteous Canadian lawyer with a tycoon ex-minister and bank founder client, and a Brooklyn crook protected by the CIA. Glimpses of this shadowy world have emerged over the years.
    [Show full text]
  • Illicit Financial Flows in Authoritarian States When There Is No Rule of Law
    Illicit Financial Flows in Authoritarian States When There is No Rule of Law By Jodi Vittori 21 MARCH 2021 | GLOBAL INSIGHTS SERIES JODI VITTORI Illicit Financial Flows in Authoritarian States: When There is No Rule of Law he COVID-19 pandemic is proving a boon for corrupt, authoritarian leaders and their cronies, allowing them to expand opportunities T for crime and graft while curtailing oversight and accountability. Worldwide, Freedom House has assessed that democracy and human rights have deteriorated in eighty countries since the new coronavirus outbreak began.1 The problem is at its worst in highly repressive states and weak democracies where safeguards on democracy already were insufficient.2 As many klepto- At the same time, as Transparency International notes, the monumental influx of domestic and foreign resources provided to fight the pandemic have opened up more opportunities cratic regimes use for rent-seeking activity and its deleterious effects. Meanwhile, governments often have the pandemic as even more discretion to allocate resources and funds with weaker transparency, account- ability, and anticorruption oversight and enforcement mechanisms to provide checks on an excuse to clamp their behavior.3 It is thus no surprise that according to the aforementioned October 2020 down on media and Freedom House report, respondents in 45 countries considered “corruption and money in politics” to be among the top three issues associated with the COVID-19 response.4 civil society freedoms, As opportunities for kleptocracy increase, efforts to expose and reform illicit financial flows transparency, and focus usually—and often correctly—on financial centers situated in democracies. Those who accountability, it engage in kleptocratic activity are assumed to prize the overall, long-term political stability that derives from consolidated democratic systems and rule of law.
    [Show full text]
  • Anti-Money Laundering and Sanctions Enforcement and Compliance in 2020 and Beyond December 10, 2020
    Anti-Money Laundering and Sanctions Enforcement and Compliance in 2020 and Beyond December 10, 2020 Panelists: Stephanie L. Brooker Ella Alves Capone M. Kendall Day Adam M. Smith Moderator: F. Joseph Warin MCLE Certificate Information • Most participants should anticipate receiving their certificate of attendance via email approximately four weeks following the webcast. • Virginia Bar Association members should anticipate receiving their certificate of attendance six weeks following the webcast. • Please direct all questions regarding MCLE to [email protected]. 2 Agenda 1. Introduction 2. Regulatory, Legal, and Advisory Updates 3. AML / Sanctions Topics in the Spotlight 4. Recommended Best Practices 5. AML and Sanctions in the New Administration 3 Introduction U.S. Enforcement Agencies and Regulators f Enforcement Responsibilities Banking Regulators and Enforcers DOJ (Civil, Criminal, and SEC (Civil) Forfeiture) OCC Fed FinCEN (Civil) CFTC (Civil) FDIC NCUA FINRA (SRO) OFAC (Civil) DFS 5 U.S. Enforcement Agencies Secretary Janet Yellen (Nominee) Attorney General William Barr (Senate Confirmed) Steven Mnuchin (Senate Confirmed) Deputy Attorney General Under Secretary for Terrorism and Jeffrey Rosen Financial Intelligence (Senate Confirmed) Justin Muzinich (Acting) FinCEN Director National Security Division Criminal Division Ken Blanco Assistant Attorney General Assistant Attorney General (Career) John Demers Brian Rabbitt (Senate Confirmed) (Acting) OFAC Director Chief, Money Laundering Andrea Gacki and Asset Recovery Section (Career) Deborah Connor (Career) 6 International Enforcement Agencies and Regulators Reserve Bank of India (“RBI”) Hong Kong Securities and Futures Commission (“SFC”) Switzerland’s Office of the Attorney General and Financial Markey Supervisory Authority (“FINMA”) Canada’s Financial Transactions and European Commission & Reports Analysis Hong Kong Monetary Centre EU Member State Authorities • Germany Authority (“HKMA”) (“FINTRAC”) • Netherlands • France • Italy Australian Transaction Reports and Analysis Centre (“AUSTRAC”) 7 Types of U.S.
    [Show full text]
  • Anti-Money Laundering Trends and Challenges
    EUROPE, MIDDLE EAST AND AFRICA INVESTIGATIONS REVIEW 2021 © Law Business Research 2021 EUROPE, MIDDLE EAST AND AFRICA INVESTIGATIONS REVIEW 2021 Reproduced with permission from Law Business Research Ltd This article was first published in June 2021 For further information please contact [email protected] © Law Business Research 2021 Published in the United Kingdom by Global Investigations Review Law Business Research Ltd Meridian House, 34-35 Farringdon Street, London, EC4A 4HL © 2021 Law Business Research Ltd www.globalinvestigationsreview.com To subscribe please contact [email protected] No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of May 2021, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries concerning editorial content should be directed to the Publisher – [email protected] © 2021 Law Business Research Limited ISBN: 978-1-83862-594-8 Printed and distributed by Encompass Print Solutions Tel: 0844 2480 112 © Law Business Research
    [Show full text]
  • Informational Materials
    Received by NSD/FARA Registration Unit 9/24/2020 4:43:51 PM View this email in your browser CMP WRKlYE'NlN BiRLESTiRKi Gi3C(i OO The story, part of a broader look at the role of banks in money laundering known as the FinCEN Files, focused on Reza Zarrab. a Turkish-lranian money launderer who worked with Turkey’s state-owned Halkbank to move billions of dollars through an underground network of shell companies and gold smugglers to help Iran evade international sanctions. Zarrab was arrested in Miami in 2016 as he arrived for a Florida vacation with his Turkish pop-star wife Ebru Gunde§, and their young daughter. He pleaded guilty to fraud and money laundering, and became a government witness in return for leniency. He is expected to testify next year in a separate trial of Halkbank. A former insider in the Zarrab organization, who smuggled suitcases of gold and cash across international borders, told OCCRP and Courthouse News that the Turkish government approved Zarrab’s operations. He also implicated Berat Albayrak, Turkey’s Minister of Treasury and Finance and son-in-law of President Recep Tayyip Erdogan, in Zarrab’s conspiracy. The Istanbul Anatolian Courthouse on Wednesday placed a gag order, preventing some Turkish media from reporting on the Zarrab stories published by OCCRP and Courthouse News. However, people in Turkey are still able to safely read Internet Archive copies of OCCRP’s FinCEN Files’ investigations about the government’s n /er ent and how Zarrab smuggled Russia’s money. Received by NSD/FARA Registration Unit 9/24/2020 4:43:51 PM Received by NSD/FARA Registration Unit 9/24/2020 4:43:51 PM Turkey’s main opposition party, The Republican People’s Party (CHP), submitted a parliamentary inquiry to Vice President Fuat Oktay consisting of six main questions from the investigation.
    [Show full text]
  • In the Matter of Michael Lafontaine
    UNITED STATES OF AMERICA DEPARTMENT OF THE TREASURY FINANCIAL CRIMES ENFORCEMENT NETWORK IN THE MATTER OF: ) ) ) ) Number 2020-01 Michael LaFontaine ) Saint Croix County, WI ) ASSESSMENT OF CIVIL MONEY PENALTY I. INTRODUCTION The Financial Crimes Enforcement Network (FinCEN) has determined that grounds exist to assess a civil money penalty against Michael LaFontaine, former Chief Operational Risk Officer (and, before that, Deputy Risk Officer and Chief Compliance Officer) at U.S. Bank National Association (U.S. Bank or the Bank), for his failure to prevent violations of the Bank Secrecy Act (BSA) and regulations issued pursuant to that Act which occurred at the Bank during his tenure. Mr. LaFontaine admits to the facts set forth below and to his role in the violations of the BSA committed by U.S. Bank. Mr. LaFontaine consents to the assessment of a civil money penalty and has entered into a CONSENT TO THE ASSESSMENT OF CIVIL MONEY PENALTY (CONSENT) with FinCEN. Among other things, Mr. LaFontaine failed to take sufficient steps to ensure that the Bank’s compliance division was appropriately staffed to meet regulatory expectations. 1 FinCEN has the authority to investigate and impose civil money penalties on financial institutions that willfully violate the BSA, and on current and former employees who willfully participate in such violations.1 Rules implementing the BSA state that “[o]verall authority for enforcement and compliance, including coordination and direction of procedures and activities of all other agencies exercising delegated authority under this chapter” has been delegated by the Secretary of the Treasury to FinCEN.2 At all times relevant to this ASSESSMENT OF CIVIL MONEY PENALTY (ASSESSMENT), Mr.
    [Show full text]
  • Open PDF 88KB
    ECC0067 Written evidence submitted by Simon Bowers, formerly of the International Consortium of Investigative Journalists, and Richard Brooks, Private Eye magazine Background on the FinCEN Files project 1. This submission contains no information from confidential documents beyond that which has already featured in reporting by ICIJ, BuzzFeed News or other media organizations collaborating on the FinCEN Files. 2. The FinCEN Files project involved more than 400 journalists from 109 media organizations in 88 countries. In the UK, collaborators joined from BuzzFeed News, ICIJ, BBC Panorama and Private Eye. 3. At the centre of the investigation were more than 2,100 suspicious activity reports (hereafter “the FinCEN Files SARs”), the vast majority of which were prepared by U.S. banks, or the U.S. branches of non-U.S. banks, and were submitted to America’s Finance Crimes Enforcement Network, or FinCEN, a unit of the U.S. Treasury Department. The SARs were sent to FinCEN between 1999 and 2017, and together reported suspicious transactions amounting to more than $2 trillion. Though the value of suspicious transactions reported in the FinCEN Files is large, the 2,100 SARs reviewed by journalists is only a small fraction of the total number of reports submitted to FinCEN. In 2019 alone, banks submitted 1,116,400 SARs to FinCEN. 4. The FinCEN Files SARs were obtained by reporters at BuzzFeed News, who shared them with ICIJ and ICIJ’s partner media around the world as part of a 16- month investigative collaboration. The resulting journalism began to be published from 20 September, with reports and broadcasts appearing over several days.
    [Show full text]
  • Banks Feel More Pressure to Upgrade AML Tech a Er 'Fincen Files'
    REGTECH Banks feel more pressure to upgrade AML tech aer 'Fincen Files' By Penny Crosman September 23, 2020, 3:24 p.m. EDT 7 Min Read Banks have long needed to strengthen their efforts to catch money launderers, which they mostly aempt to do with an-money- laundering soware. New revelaons of financial crime taking place under bankers' noses only add to the pressure to do so — quickly. This week, journalists from BuzzFeed and the Internaonal Consorum of Invesgave Journalists began publishing their analyses of a trove of 2,100 suspicious acvity reports leaked from the Financial Crimes Enforcement Network, a unit of the Treasury Department. The journalists say five large banks — JPMorgan Chase, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — allowed $2 trillion of laundering to take place through their instuons aer they had been fined by regulators for AML compliance violaons. "This leak will be a wake-up call for financial services firms and their regulators,” said Guy Harrison, general manager at Dow Jones Risk and Compliance, who pointed out that the $2 trillion in suspicious transacons were flagged in 2,000 SARs from 2011 to 2017, which were only 0.02% of the total SARs filed in that period. So the scope of the problem could be much larger. Inadequate technology Most SARs are generated by AML soware. “The situaon further brightens the spotlight on technology in the AML world,” said Jo Ann Barefoot, CEO and co-founder of the Alliance for Innovave Regulaon. “I have been one of the many people saying for a long me that we need to upgrade it.
    [Show full text]
  • Demand for Job Creation and Proliferation of Money Laundering in the United States
    Investors By Another Name: Demand for Job Creation and Proliferation of Money Laundering in the United States Sheradyn Romo University of Minnesota, Twin Cities Carly Potz-Nielsen Texas Christian University Jane L. Sumner1 ​ University of Minnesota, Twin Cities Abstract Money laundering allows money used in illegal activity to enter the conventional banking system. Money laundering networks enable terrorism, conflict, human trafficking, and other illegal enterprises to generate profits that can then be used to buy things in the legitimate economy. These illicit enterprises depend on money launderers to sustain and grow their operations; without them, illicit operations can be easily tracked and eliminated. In order to understand how money laundering props up illicit enterprises, we have to understand how money laundering operations work. In this paper, we ask: what attracts money launderers? We argue that money laundering is a natural consequence of public demand for job creation. That is, we argue that money laundering arises in response to the development of an illicit economy. The key role of money laundering is to hide the illicit origin of money using legitimate-seeming businesses. As such, we argue that constituent demand for politicians to attract businesses and create jobs should attract money launderers and also create incentives to allow existing money laundering to continue. We test the implications of this theory using a novel data set of money laundering allegations, collected from English-language news sources and government reports. In this paper, we present our preliminary results. Introduction Globalization, technological advancements, and other economic forces reshaping the United States economy and labor market have led to significant constituent demand for politicians to attract investment and “create jobs”.
    [Show full text]
  • Executive Summary • Evidence Suggests That Regulated Industries
    ECC0059 Written evidence submitted by Professor John Heathershaw (Associate Professor of International Relations at University of Exeter); Thomas Mayne (Research Fellow, Department of Politics and International Relations at University of Exeter); Professor Jason Sharman (Sir Patrick Sheehy Professor of International Relations at University of Cambridge); Dr Tena Prelec (Research Fellow, Department of Politics and International Relations at University of Oxford); Professor Ricardo Soares de Oliveira (Professor of the International Politics of Africa at University of Oxford); Professor Alex Cooley (Professor of Political Science, Barnard College at Columbia University) Executive Summary Evidence suggests that regulated industries – this submission concentrates on the banking and real estate industries – fail to properly implement the risk based approach mandated in the anti-money laundering regulations in relation to high risk clients, especially politically exposed people (PEP). This is predominantly a failure of compliance, most likely due to a lack of effective enforcement, although the anti- money laundering regulations could be improved to address the issue of PEPs from corruption hotspots or ‘kleptocracies’. The FinCEN files suggest that banks are the most likely regulated industry to file ‘defensive’ Suspicious Activity Reports (SARs) in order to escape legal liability, rather than blocking the transaction (or further transactions) and closing the client’s account. Meanwhile, real estate agents and conveyancers are not incentivized to files SARs, whose numbers in these sectors remain low. Until professionals in regulated industries are prosecuted or sanctioned for failing to report suspicions or knowledge of money laundering, compliance will remain low. The same can be said for those submitting false information to Companies House.
    [Show full text]