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Financial crime: Bringing to light the cost of ‘victimless’ lawbreaking

David Craig  President of Financial & Risk, Thomson Reuters

David Craig  President of Financial & Risk, Thomson Reuters

Money laundering, fraud and corruption hurt real people. A new series aims to highlight this often-hidden cost and what we all can - and should - do about it.

When many people think of financial crime, they frequently think of it as a crime with no real victim or cost. Perhaps insider dealing or fraudulently making a claim against an insurance company. No one actually loses “real” money or suffers true harm.

Today, Thomson Reuters is launching its financial crime conversation – a series of events designed to demonstrate the impact financial crime can have and the role we all play in tackling it. As the events will demonstrate, it is far from victimless. From human trafficking in Malaysia to prostitution in Romania, from victims of the drug wars in Mexico, to dangerous buildings in Kenya, the human cost of financial crime is very real.

Corruption and financial crime are not new; they have been a feature of society for millennia, since the concept of money first developed. What is new is the sophistication of financial criminals, and their ability to use technology to facilitate money laundering.

Banks, financial services companies and public institutions need to be working together in the vanguard of fighting this crime. They need ever-more sophisticated tools to monitor and track criminals and the transactions they undertake.

The Organized Crime and Corruption Reporting Project (OCCRP) has spent years uncovering some of the most sophisticated money laundering rings ever discovered.

Most recently, it was responsible for a cross-border collaboration to uncover what became known as the Azerbaijan laundromat. Between 2012 and 2014, almost USD$3 million was channeled out of Azerbaijan every day, with cash from companies linked to that country’s president transferred into a number of offshore-managed UK companies.  From there, it was spent in various countries, including Germany, the UK, France, Turkey, Iran and Kazakhstan.

Much of this money was funneled through the European banking system, through thousands of transactions which were not spotted or red-flagged.

The ultimate recipients remain unknown, but the OCCRP believes that in many cases it was used to cover up human rights abuses in the country and divert funds to suspect regimes.

Currently, only a very small amount of illegal activity is detected in the global financial system. In 2011, a United Nations Office on Drugs and Crime report estimated that less than 1 percent of criminal funds flowing through the international financial system every year are believed to be frozen and confiscated by law enforcement. Move forward six years and we find a similarly low percentage.

That is why it is so crucial to use all the tools at our disposal to step up the fight against financial crime.

The amount of data in the world is proliferating at a fantastic rate and detecting signals in the noise can be a significant challenge. This includes determining whether the data and its provenance is reliable, how to collate it, how to ensure it is up to date and how to transform it into something that provides valuable insight.

Technological advances can help connect the dots and do it quickly, so that we can spot the patterns that are evidence of crime and prevent malicious activity from happening in the first place.

But it is also imperative that public and private sector organizations work in partnership with each other to exchange data, share information, harness expertise to help prevent financial crime and the untold societal harm it can bring.

Only then can we really hope to take the fight to the child traffickers, drug cartels and prostitution rings, and start to win it.

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