Recommendations point to the need to expand public-private partnerships and global information sharing, increase the effectiveness of enforcement frameworks, and incorporate emerging technology into the fight against illicit flows.
October 16, 2019, Washington D.C. – Today, the Institute of International Finance (IIF) and Deloitte released a new white paper calling for a combination of regulatory reform, cultural change, and the deployment of new technologies to better counter the threats posed by illicit flows through the international financial system.
Despite tens of billions of dollars being invested in anti-money laundering (AML) and countering the financing of terrorism (CFT) efforts worldwide, stemming the tide of economic crime remains incredibly challenging; the amount of money laundered globally each year is estimated to be 2% to 5% of global GDP, or between 715 billion and 1.87 trillion Euros.
“It is clear to all involved that the current AML/CFT framework is broken. The measure of effectiveness must include compliance and success, and a one percent interdiction rate doesn’t look like success to me,” said IIF President and CEO Timothy D. Adams. “Moving forward with the intelligence-led approach outlined in this paper - driven by meaningful reforms, public/private sector cooperation and the use of technology - is essential to improving outcomes. I urge policymakers to consider these recommendations quickly, as the impacts of financial crime are felt beyond just the financial sector – it poses grave threats to society as a whole.”
In the white paper, “The Global Framework for Fighting Financial Crime,” IIF and Deloitte say greater emphasis must be placed on improving the legal and regulatory framework and risk management toolkit to enhance effectiveness. Central to this reframing is the expansion of public-private partnerships (PPP) and expanding cross-border data exchange. The IIF and Deloitte encourage stakeholders to work together on greater regulatory clarity and consistent standards, pooling resources, and removing barriers to information sharing.
Additionally, IIF and Deloitte predict significant improvement in outcomes from investing in and deploying more technologies like artificial intelligence and machine learning as weapons against financial crime.
“It is important that the right environment is created to encourage investment in technologies that allow the volumes of data created by modern banking to be analyzed and interpreted. Big data must become a weapon against crime, not an enabler of it,” said Michael Shepard, Deloitte’s Global Financial Crime Practice leader and a Deloitte Risk & Financial Advisory principal in Deloitte Transactions and Business Analytics LLP. “Technology in combination with the other recommendations discussed in this paper, such as public-private partnerships, improving information sharing, and reforming suspicious activity reporting will be critical to combat the continuously evolving tools of criminals and help stem the flow of illicit finance.”
The recommendations outlined in the white paper are the result of a collaboration between the IIF and Deloitte in which the organizations conducted research and interviews with private sector financial institutions and public sector authorities responsible for AML/CFT, and wider financial crime policy and enforcement across Europe, Africa, Asia, the Middle East and the Americas. The concepts in the paper build upon the good work currently underway through the Financial Action Task Force (FATF), other public sector bodies and the private sector in tackling this important issue.
The full set of recommendations made in the report include: 1) Systemic architectural improvements for financial crime risk management; 2) Advancing public/private sector cooperation; 3) Improving cross-border and domestic information sharing; 4) Improving the use and quality of data; 5) Reforming Suspicious Activity Reporting regimes; 6) Mitigating the inconsistent or incoherent implementation of financial crime compliance standards/guidance and providing regulatory clarity; and 7) Increasing and improving the use of technology to combat illicit finance.
The complete white paper is available here: https://www.iif.com/Publications/ID/3606/The-Global-Framework-for-Fighting-Financial-Crime-Enhancing-Effectiveness-Improving-Outcomes
About the IIF
The Institute of International Finance is the global association of the financial industry, with close to 450 members from more than 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks.
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