Phil Rolfe, financial crime expert and CEO at P2 Consulting

The latest leak of over two and a half thousand secret bank documents, unearthed in the so called FinCEN files, pertains to $2 trillion of transactions and reveals how criminals have exploited banks to let them to move money around the world.

According to these files, HSBC allowed fraudsters to move millions around the world, related to a Ponzi scheme. JP Morgan allowed a company to move more than £1 billion through a London account without knowing who owned it. And the UK is head and shoulders above all other countries in terms of misdemeanours, with 3000 UK companies named in the FinCEN files. So how does this happen? What are banks doing to stop it?

What are banks doing to stop it?

Whilst some of the information has been made visible before you would have thoughts that after HSBC got its fingers burned in the Mexican drug cartel money laundering scandal in 2012, it was a wake-up call to all banks to get their financial crime houses in order. But whilst compliance regimes have become much more rigorous and banks have strived to rid their banks of wrong-doing and flush out the money launderers, the criminals are wilier and anti-money laundering systems aren’t robust enough to evade the onslaught.

Some key reasons why the issue is so bad and more needs to be done:

• Reporting system needs improving:  it has long been known that the Suspicious Activity Reports (SARs) approach is flawed – it is being used as a defence by institutions, but it is not robust enough to really crack down on financial criminality
• Government action follow through: this is one of the key reasons that the UK has performed so badly compared with other countries – the improvement of the SARs approach has been on the government’s agenda for years. They came up with their latest action plan to improve it in 2016 but not enough has been done to put it into practice
• Banks need to provide more actionable data: SARs are an essential part of intelligence gathering and whilst all financial institutions should seek to use them – many, unfortunately, still don’t provide clarity of insight and quantification of the potential impact
• Regulators drowning under the weight: with most financial institutions submitting SARs in high numbers, the regulators are not well-resourced enough – so they stagger under the weight of the tsunami of SARs they do receive. This makes it all but impossible to log all cases, let alone properly investigate and filter out the real issues
• Technology is essential: by improving structure of recording, speed and dynamics of analytics and clarity of feedback, the institutions will be able to act faster and in a cohesive manner to identify, investigate and close down criminal activity.

It’s an ongoing battle with the financial criminals. And to be fair, banks have come on leaps and bounds in the last ten years. But there is still a long way to go and a global joined up approach with governments, the regulators and the international financial industry is absolutely essential if we are to wipe out financial crime and put perpetrators behind bars.

P2 FinCrime have the experience and capability to support you and your business today, please email me at phil@p2fincrime.com or call +44 (0) 7798 666 454.