ICC Commercial Crime Service

Economic Crime Survey Reveals Money Laundering Risks

In our world of asset tracing and asset recovery, we regularly witness the ill effects that money laundering and other economic crimes have on companies, organizations and even governments. Financial institutions, too, know all too well the impact economic crimes have on their clients and, often, themselves, especially with the increasing regulation and compliance standards they must follow. Yet, despite our collective experience, many global organizations still lag behind in preventing and reporting economic crimes and bringing their perpetrators to justice.

Pricewaterhouse Coopers (PwC) recently released its Global Economic Crime Survey 2016, and it reveals that more than a third of the 6,337 organizations in 115 countries that responded to the survey have experienced economic crime over the past 24 months. While overall the incidence has come down by 1 percent since the global financial crisis in 2008-2009, PwC warns this small decrease may be hiding that economic crime is changing and organizations are struggling to keep pace with its evolution. Further, PwC reports the financial cost of each fraud is on the rise.

One of the primary areas organizations should focus their risk-mitigation strategies on, according to the findings of the report, is anti-money laundering controls and programs. And, as the survey indicates, banks and financial institutions are not the only ones that should follow these strategies. In fact, newer Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations include any organization, such as digital or mobile payment services, life insurers and even law firms, that facilitates transactions. Many of these sectors – previously untouched by these types of regulations – are unsure how to adequately implement controls or even conduct risk assessments. This exposes many more global companies to the threat of money laundering and the resulting reputational risks.

These exposures threaten an organization’s bottom line, which is also being impacted by increased costs to roll out compliance programs and to protect the organization’s finances against potential fines and other sanctions. Estimates place the global cost increases at 9 percent annually, surpassing US $8 billion by 2017.

To try to keep pace with this quickly changing environment of threats and regulations, companies are turning toward hiring employees experienced in this arena. But, as the survey found, supply of employees well versed in the global regulatory environment, transaction monitoring and data analytics, falls far behind growing demand. Couple that with outdated monitoring technology, and companies face an increasing uphill battle against potential criminal activity.

Maintaining a sound internal infrastructure against criminal activity is paramount to combating economic crimes, but getting back to basics and knowing their customers is equally important for companies to prevent criminal activity like money laundering. An adequate and continuous “Know Your Customer” policy, the survey notes, is essential for identifying suspicious activities.

For example, business relationships and frequent transactions in countries with weak AML regulations may be a red flag to prompt action.

Like the regulations that guard against them, economic crimes are evolving to outpace those regulations. While these tools somewhat level the playing field, the criminals are staying one step ahead. Keeping our eyes on the horizon for what’s to come next and paying close attention to what threatens our clients now, will help us better advise them if, but more likely when, these economic crimes occur.

Rodrigo Callejas, partner with Carrillo y Asociados, focuses on insolvency, fraud, asset tracing and asset recovery. He has actively participated in complex white-collar crime investigations in Central and South America, United States, the Caribbean and Europe.

The author gratefully acknowledges the assistance of James Pomeroy of PwC in preparing this article.





ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.