Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Building the Basis of a Transatlantic Response to Illicit Finance

Building the Basis of a Transatlantic Response to Illicit Finance

Despite years of technical efforts led by the Financial Action Task Force (FATF), the global anti-financial crime standard setter, the challenge of illicit finance endures.

In fact, its impact seems ever more insidious. Illicit finance is not merely the domain of criminals; it also supports kleptocrats and those engaged in grand corruption both for their own gain and, increasingly, for national advancement.

Central to this proliferation of dirty money is the role played by leading global financial centres as facilitators of, and safe harbours for, the money generated by kleptocrats and other malign actors. Chief among these havens are the US and the UK, where the realisation is dawning that illicit finance not only undermines the integrity of their economies, but it also threatens national security, notably being used to erode democracy.

Against this backdrop of increasing political support for greater action against illicit finance, RUSI’s Centre for Financial Crime and Security Studies held the first meeting of its Taskforce on a Transatlantic Response to Illicit Finance (TARIF) in late July. This meeting focused on how the US and the UK can shore up their domestic foundations, to plug the gaps that are all too often exploited by malign actors to facilitate flows of illicit finance around the globe.

TARIF also considered how the US and the UK – as key members of a range of relevant anti-financial crime and security communities – must collaborate to draw attention to the widespread failings of the contemporary global counter-illicit finance regime.

Fixing the Home Base


To ‘fix the home base’, TARIF members put forward the following starting points:

1. Central to advancing the response to illicit finance must be an acknowledgement by leading policymakers in the US and the UK that both countries have domestic vulnerabilities – with international consequences – that must be remedied. As the UK’s Economic Crime Plan (ECP) notes, ‘strong domestic action will underpin our efforts to combat economic crime and illicit financial flows at the international level’.

2. Supervision of ‘professional enablers’ – such as lawyers, accountants and real estate agents that provide the services that facilitate the moving and storing of funds – must be strengthened. Greater use should be made of technology to support supervision in both jurisdictions. In the UK, the CEO of the Financial Conduct Authority has talked of becoming a ‘data-led regulator’ – but what does this mean, and how does it become a reality? Smaller regulated entities must be subject to far more muscular supervision and enforcement to promote greater responsibility and cultural change. In both countries this will require a close look at the structure of the supervisory regime, ensuring that those responsible for supervision have no conflict of interest between their status as a membership organisation and supervisory responsibilities for those same members. In the US, this means supervising lawyers by making use of FinCEN’s (the US financial intelligence unit) existing authorities. This failure to regulate lawyers in the US, in particular, undermines the credibility of the US as a global leader in tackling illicit finance.

3. Furthermore, both countries must dedicate more attention to the supervision of real estate and private equity, asset classes favoured as havens for the proceeds of corruption. In the US, smart intelligence gathering tools, such as Geographic Targeting Orders, that require real estate title insurers to collect and report certain financial crime related information to FinCEN, should be placed on a permanent footing. In the UK, where a similar tool has been under consideration as part of the ECP, this should be introduced via reforms to the UK’s Proceeds of Crime Act to boost the paucity of financial crime intelligence currently gathered.

4. Vehicles that have proved to be loopholes in illicit finance defences, such as private schools and universities, as well as those that facilitate citizenship and residency schemes, should be subject to much greater scrutiny and potentially brought under anti-financial crime regulations. In this regard, the recent suggestion in the EU’s proposed new anti-money laundering (AML) regulation that companies offering investor residency schemes should also be covered by AML obligations is worthy of note.

5. Without strong enforcement, regulations and laws are meaningless. This shortcoming is particularly evident in the UK. Thus, a concerted effort must be made to greatly enhance the enforcement response to meet the current illicit finance threat. Where greater financial resources are needed, a new funding model may be required which could make use of the soon to be introduced Economic Crime Levy in the UK, but is likely to require more radical thinking – for example, increasing investment via the expanded use of seized criminal assets. Laws may also need adapting. For example, corporate criminal liability should be introduced to target enablers of illicit finance. Furthermore, to mitigate the fact that UK law enforcement currently faces situations in which it cannot risk the potential costs associated with pursuing high-value illicit finance cases, close consideration should be given to the introduction of cost-capping in civil cases.

An Honest Assessment


Alongside acknowledging their domestic vulnerabilities, the US and the UK should lead an honest international discussion about the state of the current anti-financial crime system, a system that – to a great extent – does not work effectively. Given the countries’ positions in the G7, G20, the FATF and the UN Security Council, and their combined role as cheerleaders for the global effort to strengthen financial integrity, such a discussion would carry significant weight and mitigate legitimate accusations of double standards.

In addition, the US and the UK should commit to reforming the global anti-financial crime system focusing on outcomes – for example, clear impact on profit-motivated crimes such as human trafficking – and not outputs. This should be based on a whole-of-system approach, with responsibility in the private sector distributed in terms of risk, covering all professions (such as lawyers and real estate agents, not just banks) that contribute to financial crime.

Cross-border information sharing must lie at the heart of any meaningful recasting of the response to illicit finance. While domestic information sharing to fight financial crime has improved considerably in the past five to seven years, international sharing remains nascent. As they have done domestically, the US and the UK should lead the way by developing a transatlantic public–private information sharing partnership. This must include more private–private sharing, which is tactical, real-time and moves towards a shared data format so that resources can be most effectively deployed. This must also include greater involvement from intelligence agencies, an essential step for tackling illicit finance linked to kleptocracy.

Information sharing should not be restricted to traditional private sector actors but must also embrace social media providers, and consideration should be given to whether these new facilitators of illicit finance should also be placed within the regulated perimeter, requiring them to play a central part in the response to illicit finance.

Time for a Radical Rethink


No other countries have invested so much in developing the global policy architecture for combatting illicit finance. Now it is time for the US and the UK to unequivocally commit to getting their houses in order and lead by example. They should provide no excuses to those that have historically been able to point to US and UK shortcomings to justify their own failings. Washington and London should collaborate to use their positions of influence in the financial crime community to lead a radical rethink in the international response to illicit finance.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Druzhba Pipeline Incident Sparks Geopolitical Tensions
Cost of Opposition Leader Péter Magyar's Economic Plan Revealed
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Budapest Central European Fashion Week Kicks Off
U.S. Celebrates Labor Day
Hungarian National Team Captain Scores Epic Goal
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Japanese Customer Sways from VW to BYD after “Unbelievable” Test Drive amid Dealership Expansion
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Pickles are the latest craze among Generation Z in the United States.
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
White House Eyes Budapest for Peace Talks
Cave Diving Beneath the Streets of Budapest
Another American Restaurant Chain Opens in Budapest
Hungarian Opposition Politician Supports Ukrainian Commander
Opposition Leader Threatens Media Outlets
American Airlines Adds New Flights to Budapest
F1 Hungarian Grand Prix Wraps Up
WhatsApp is rolling out a feature that looks a lot like Telegram.
U.S. Trade Representative says Washington still negotiating trade deals after court rules tariffs illegal
Von der Leyen says Europe drawing up 'precise' plans to send troops to Ukraine
Kremlin accuses Europe of hindering Trump’s peace efforts in Ukraine
×