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Human Trafficking a Serious Money Laundering Concern for Financial Institutions

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According to BAE Systems' The State of Anti-Money Laundering 2021 report, human trafficking is among the top concerns for financial institutions, with 77% of compliance professionals lacking confidence in stopping associated crimes. The report reveals that over 60% find new money laundering techniques harder to detect, contributing to substantial financial losses. In the UK, 25% of compliance professionals cited human trafficking as the largest loss source. The study highlights a stagnant compliance culture and calls for better collaboration among banks, law enforcement, and policymakers to tackle these challenges effectively.

Positive
  • BAE Systems' research highlights the urgent need for improved anti-money laundering measures.
  • The report emphasizes increased awareness of human trafficking as a key financial concern in the banking sector.
Negative
  • 77% of compliance professionals lack confidence in preventing money laundering linked to human trafficking.
  • Over 60% of respondents report that advanced criminal techniques are increasingly difficult to spot.
  • Compliance is viewed as a box-ticking exercise by 76% of financial professionals, hindering effective money laundering prevention.
  • BAE Systems data reveals human trafficking is one of the top 5 biggest financial concerns for banks and insurers
  • Money laundering techniques are now harder to spot and stop
  • Financial compliance professionals blame ‘stagnant’ rules and regulations for hindering efforts to tackle money laundering

LONDON--(BUSINESS WIRE)-- Human trafficking is now one of the biggest concerns for compliance professionals across the globe, according to the latest annual anti-money laundering study from BAE Systems: The State of Anti-Money Laundering 2021.

According to the latest data, over three quarters (77 per cent) of compliance professionals admit they are not confident that money laundering crimes linked to human trafficking could be stopped from passing through their customers’ accounts. More than 60 per cent of those surveyed said that advanced, new criminal techniques have become even harder to spot in the last 12 months and the financial impact on banks has been huge. In the UK, a quarter (25 per cent) of risk and compliance professionals within financial institutions said that human trafficking was causing the largest financial losses of all anti-money laundering crimes. In the US, it was a third and in Australia, nearer half (45 per cent).

Banks worried by human impact of money laundering

Alongside fraud, corruption and organised crime, human trafficking has been cited as a top 5 concern, with more than a quarter (27 per cent) of those questioned admitting that it is a serious worry.

Almost a third (29 per cent) said that their teams struggled to identify the key indicators linked to human trafficking and one in five (21 per cent) simply do not have enough anti-money laundering intelligence within their organisation.

Compliance now a box ticking exercise that ignores the real problem

Compliance is a major cost centre for financial institutions, particularly when it comes to anti-money laundering. However, the consensus from many professionals in the industry (76 per cent) is that compliance has become a box ticking exercise that is getting in the way of tackling the true source of the money laundering.

With more than half (57 per cent) of money laundering remaining uncovered over the last year, almost a fifth (17 per cent) said compliance is now a stagnant culture that doesn’t go far enough to understand and support the real-life victims of money laundering.

Enda Shirley, Head of Compliance at BAE Systems Applied Intelligence, commented: “For many financial institutions, getting a handle on money laundering is now simply about ensuring they avoid fines or reputational damage.”

“Our research is telling us that the current system just doesn’t go anywhere near deep enough to have a significant impact on the crux of the issues. For many, compliance has gotten in the way of the primary goal – how to identify and protect vulnerable victims.”

Call to action: ‘more collaboration and shared intelligence needed’

The research suggests banks and financial institutions, policy makers and law enforcement, need to come together in what is described as a Fin Crime Feedback Loop to better tackle money laundering challenges.

Many financial institutions are looking for more input and action from law enforcement bodies, with half of respondents (50 per cent) revealing that they currently do not feel well enough supported. Almost a third (32 per cent) are calling for more shared industry intelligence.

A summary of key stats from The State of Anti-Money Laundering 2021:

Money laundering is a severe and pervasive societal challenge

- Over half of money laundering is slipping through the net, according to those surveyed
- 1 in 3 say it’s almost impossible to spot emerging criminal typologies, it’s hard to measure how often money laundering is happening, and it’s hard to quantify the impact
- 62 per cent say money laundering has become harder to spot over the last 12 months

So why isn’t compliance solving the problem?

- 1 in 6 compliance professionals say compliance is a stagnant culture
- The majority say compliance isn’t getting to the bottom of the issue
- And against all of this, most financial institutions are trying to comply whilst at the same time facing budget cuts of up to 25 per cent

The Fin Crime feedback loop – compliance, done well, has a huge societal impact

- 40 per cent of respondents believe that they would benefit from a central money laundering group to share intelligence across key industry stakeholders
- 92 per cent of those surveyed believe that the lack of collaboration between financial institutions, law enforcement and policy makers hinders progress

Enda continued, “Stopping these incidents at the point of transaction is really still only a small part of tackling the problem. There is work to do to look deeper into how we can look for early indicators of these often life changing offenses. For real change to happen, collaboration across the anti-money laundering industry is essential. This means law enforcement, policy makers, financial institutions and technology consistently working together more closely to share insights and intelligence.”

To read the report please visit: www.baesystems.com/2021AMLReport

Notes to editors

The State of Anti-Money Laundering 2021
Methodology: An online survey was conducted by Atomik Research among 452 financial professional respondents, working in risk management and compliance within the banking and insurance sector. The research took place across the UK, USA, France, Germany, Australia, and Singapore. The fieldwork took place on 16th July – 21st July 2021. Atomik Research is an independent creative market research agency that employs MRS-certified researchers and abides to MRS code.

About BAE Systems Applied Intelligence

At BAE Systems Applied Intelligence, we help nations, governments and businesses around the world defend themselves against cybercrime, reduce their risk in the connected world, comply with regulation, and transform their operations. For more information regarding our compliance, fraud detection and prevention solutions, visit www.baesystems.com/financialservices.

For Europe:

Nick Haigh, BAE Systems

M: +44 (0) 7525 3909782

E: nick.haigh@baesystems.com

For North America:

Brad Grantham, BAE Systems

M: (919) 519-8528

brad.grantham2@baesystems.com

Source: BAE Systems Applied Intelligence

FAQ

What does the BAE Systems report say about human trafficking and financial institutions?

The report states that human trafficking is a top concern for financial institutions, with 77% of compliance professionals lacking confidence in stopping related crimes.

What are the findings related to money laundering techniques in the BAE Systems report?

Over 60% of compliance professionals believe that new money laundering techniques have become harder to detect in the past year.

How significant is the financial impact of human trafficking according to BAE Systems?

In the UK, 25% of compliance professionals reported that human trafficking is causing the largest financial losses from anti-money laundering crimes.

What challenges do compliance teams face according to the BAE Systems report?

Nearly a third of respondents struggle to identify indicators of human trafficking, and 21% lack sufficient anti-money laundering intelligence.

What does BAE Systems suggest for improving compliance in financial institutions?

The report calls for better collaboration among banks, policymakers, and law enforcement to effectively tackle money laundering challenges.

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