5 Key Trends from ACAMS Europe Conference to Watch

Money Laundering is a Much Bigger Threat than Many Realize

Arguably one of the most troubling trends discussed at ACAMS Europe was the scope of the region’s (and frankly, the world’s) money laundering challenges. To put it mildly, the scale and complexity of money laundering activities across the region are seriously underestimated. 

To give you an idea, participants at a Europol session at the conference estimate that the size of the European money laundering market is valued at roughly €440 billion. But only 1.1% of these criminal funds are recovered and returned each year by law enforcement.

The value of recovered funds is peanuts compared to the billions spent by European financial institutions (FIs) on anti-money laundering (AML) and counter-terrorist financing (CTF) compliance programs. Meanwhile, an Italian Organized Crime Group (OCG) was identified as having annual combined revenues equivalent to that of McDonalds and a global Tier 1 FI ‒ all of which needs to be laundered each year.

Panelists at ACAMS Europe noted that the sheer volume of this figure reveals some troubling trends that must be acknowledged:

• Criminals have created a parallel, shadow economy.  Roughly half of EU-based money laundering happens outside the financial system. In other words, criminals have created their own financial systems that circumvent detection.
• Criminals have infiltrated legitimate financial services. Despite operating in the shadows, an estimated 80% of criminal organizations in the EU are still using legitimate financial services to launder money.
• Professional money launderers are thriving. About 68% of EU criminal organizations use the services of professional money launderers, some of whom now offer a tiered level of servicing (e.g., bronze, silver, and gold) depending on their client’s preferences and risk tolerances.

New AML Organization Taking Shape

Officials in the EU are seeking to address this threat by creating a new agency to crack down on money launderers. The organization, known as the EU AML Authority (AMLA), aims to ensure cooperation and information-sharing among the EU members’ anti-money laundering/combatting the financing of terrorism (AML/CFT) supervisors and any relevant non-AML/CFT authorities. Based on the scope of the AML challenge, however, this new organization will have its work cut out for it. Building strong public/private partnerships is increasingly important for this new agency to be effective.

Promising New Information Sources 

Fortunately, the ACAMS Europe conference also revealed a promising avenue to bring criminals’ ill-gotten assets into the light. This avenue runs through the insurance industry. 

Many criminals try to launder money by buying expensive high-end items, including exotic cars or real estate. These assets must be insured just like any other valuable property. This means the insurance industry has access to information about where criminals hold assets that is highly valuable to law enforcement.

Insurance industry experts are already exploring legal gateways for how law enforcement can request this information that doesn’t put other clients’ information at risk. Development and production of these legal gateways at every part of the financial chain will be a critical step in stopping money launderers.

Transaction Monitoring Links Fraud & AML

The full potential of transaction monitoring (TM) solutions was another major point of discussion at ACAMS Europe – especially when they are applied to real-time fraud detection. 

TM solutions are proving critical to stopping Ponzi schemes, investment scams, get-rich-quick crypto scams, romance scams, and other deception-based types of fraud. By understanding how their customers normally behave (such as an older client making a large-value cross-border transfer), a bank can detect fraud before it happens and protect their client.

But Transaction Monitoring goes a step further by establishing a link between fraudulent patterns and money laundering activities. Fraud is often a predicate to money laundering. Some banks use TM to detect money mule activity in their fraud department and pass the information to their AML teams for further investigation. 

TM solutions can be used to understand the typology of a scam and protect their customers. From there, fraud signals can be used to capture money laundering patterns early on and bring criminal activity to light.

Emphasis on ESG to Fight Financial Crime

The role of Environmental, Social, and Governance (ESG) was another fascinating angle discussed at ACAMS Europe. ESG sets a standard for socially-aware investors to measure how businesses behave. 

Two Key Ways for AML Teams to Look at ESG Adoption

1. The environmental question. Several countries consider environmental crimes as a predicate AML crime and a warning signal for additional criminal activities. In the agricultural sector, for example, a major developer or ranch owner could deforest a large section of woodland to open a ranch or start a palm oil business. This effort harms the environment through deforestation and pollution if chemicals or toxic waste spill into a nearby river.
2. The social question. An effort like the deforestation of several acres will likely require forced labor, which can come from human trafficking. The social responsibility question also applies to exotic or endangered animals sought after by collectors (think, the Tiger King). 

When viewed through an ESG lens, there is clearly more illicit crime going on with these businesses than what appears on the surface. Banks should consider combining their ESG and AML profiles to detect special interests to more effectively address financial crime. This approach enables organizations to look at their customer base and understand whether any of their investments are linked to some of the world’s most heinous crimes. 

The Rise of Crypto and Alternative Payment Platforms 

Naturally, the rise of cryptocurrency was another key point of discussion. 

Crypto exchanges, eMoney services, and other alternative payment platforms have gained significant ground in recent years. But despite the emergence of new players and participants, alternative payments are still very much a nascent industry. Several major cryptocurrencies lost significant value in just the past few weeks. Some stablecoins are even trading at close to zero.

The bottom line is that virtual asset services are growing increasingly more complicated. As such, it’s important to look carefully at these platforms’ stability and understand the risks they pose. After all, a financial crime that occurs on an alternative payment platform has the potential to destabilize an entire country. 

These platforms need the support of banks to operate successfully. For banks, it’s time to ask if they are prepared to accept the risks. While there’s no need to be afraid of the cryptocurrency industry and alternative payment platforms, it is wise to understand how they perform customer due diligence and KYC processes. Understanding how these new products work is key to protecting customers and understanding money laundering risks. It also demonstrates to your banking partners and regulators that you understand your risk and obligations and take the “high-risk” nature of this industry seriously.

Download The Ultimate AML Compliance Checklist for FIs to learn the key components that go into building an effective AML compliance program and make sure you check all the boxes.