What is Money Laundering..?


Money laundering involves the deliberate cleaning up of the proceeds of crime. Increasingly this area has seen major developments in recent years in the terrorist financing and cyber space.

Terrorist financing is now included in this overall area but has a different approach, as it relates to the use of legitimate and illicit funds to finance terrorist activity. Cyber-related tactics are relevant to this whole area and relate to the use of new technologies to achieve similar illicit objectives. The use of new technologies to conduct illicit activities requires a very different practical toolkit for counter-measures, with surveillance, detection and data protection expertise core assets. But this does not change the fundamental approach to illicit activities as their scope spreads into innovative media and spheres of influence.

The effectiveness of the response to money laundering is currently at a crossroads – despite huge amounts invested in anti-money laundering programs, the level of effectiveness is relatively underwhelming.

The former head of Europol, Rob Wainwright, complained of the lack of success in curbing the money laundering issue in the EU in April 2018:

“…Professional money launderers — and we have identified 400 at the top, top level in Europe — are running billions of illegal drug and other criminal profits through the banking system with a 99 percent success rate…”

“…One of my favourite frustrations is on financial crime – the anti-money laundering regime. We have created a whole ton of regulations … the banks are spending $20 billion a year to run the compliance regime … and we are seizing 1 percent of criminal assets every year in Europe…”

To complicate matters further, there is no uniform approach to money laundering enforcement around the world. The OECD’s Financial Action Task Force (FATF), the global anti-money laundering body laid down its official 40 Recommendations detailing uniform offence types in 2012, and although these have been adopted by its members, there is highly diverse enforcement across the world. This means that penalties for the same offences differ widely.

One good example is the European Union which, in the wake of the Baltic money laundering scandal revelations of 2018 and onwards, was forced to ramp up its timetable and introduce broader offence types in its Anti-Money Laundering Directive 6 (AMLD6) (Dec 2020 implementation). The EU’s AMLD5 entered into force in 2018, but many EU Member States have struggled to comply and full adoption in Jan 2020 is a challenge for many. There are plans afoot in the EU to create an EU-wide enforcement body, but to date the enforcement is carried out by individual Member States.

Perhaps the greatest challenge globally comes from the US, which has incorporated its Anti-Money Laundering program (AML) into its global Sanctions regime, largely coordinated by the US Treasury’s Office of Foreign Assets Control (OFAC), as well as other US Departments, such as State. Domestically, US Treasury’s FinCEN handles anti-money laundering matters as the US Financial Intelligence Unit (FIU), but has quite a wide scope, supporting Local, State, Federal and International law enforcement investigations relating to financial crime.

This means that the US is able to operate its own laws in cross-border fashion – finding fault with individuals, entities, governments, jurisdictions and even transaction types – even when the offences have occurred outside of US territory and outside of US dollar transactions. This has led to major confusion and conflicts between the US and other national or regional approaches to combating money laundering and terror financing.

But given the huge level of penalties issued by the US versus other parts of the world from 2008-2018 (a survey showed that at $23.52bn, US fines constituted a massive 91% of all KYC, money laundering and Sanctions fines around the globe from 2008-2018), and the severity of US measures, it is paramount that preparations are made for the eventuality of US penalties.

A proactive, pre-emptive, pragmatic and results-oriented approach to Money Laundering is therefore essential.