How Covid is Changing Money laundering

Introduction

The pandemic has been been a big catalyst for the adoption of RegTech, and more efficient and effective Anti money laundering measures. Certain money laundering risks have emerged and the resilience of national regimes to combat them varies significantly from country to country.

Covid-19 and the Changing Money Laundering Behaviour

Globally criminals are  profiting from the pandemic. These include fraudulent access to and diversion of government aid, to the impersonation of government officials, fake fundraising campaigns and the counterfeiting of medical supplies, and now vaccines. Criminals have used the rapid  increase in online activity to develop targeted malware campaigns, ransomware or phishing attacks with fake links to government stimulus packages, infection rate maps and websites selling personal protection supplies.

Example from the FATF Report

As an example in the region, the Tunisia financial intelligence unit reported the misappropriation of aid given by a foreign country to its citizens stranded in Tunisia due to the pandemic. Six transfers, totalling USD 2.5 million, were meant to cover accommodation, medicines, supplies and COVID-19 tests but instead disappeared to a shell company. The suspect’s assets have been frozen while the case is ongoing, but it demonstrates criminals’ determination to exploit this global crisis. Cases such as this are sadly not unique. Much needed financial support is disappearing into the hands of criminals at a time when citizens, health services and communities need it most.

Change in customer behaviour

The change in customer behaviour has turbocharged online transactions with growing numbers of online payments in nearly every sector.

With ever-growing mountains of online transactions and the trend to a cashless society, identifying the anomaly is not humanly possible.

What is The role of Tech ?

We must  use better  technology, to make us more effective and efficient in weeding out criminal activity.

Big data analytics and machine learning, for example, are reducing false positives that require manual review. This contributes to enhanced productivity and the standardisation of compliance efforts.

A key priority of the FATF is to explore the opportunities of the digital transformation brings to fighting money laundering.

What does the FATF recommend?

In particular, the FATF is focussing on three areas:

1. Identifying the opportunities and challenges of new technologies for the private sector, supervisors and regulators;
2. Exploring the potential for data pooling, analysis and the real and perceived barriers to this including data privacy and protection, to explore new technologies that facilitate information-sharing amongst financial institutions while protecting personal information; and
3. Helping to accelerate digital Transformation for operational agencies, such as financial intelligence units and law enforcement authorities.

Artificial intelligence, machine learning and privacy enhancing technologies have the potential to transform the way we fight money laundering and terrorist financing

The rise of human and machine

The use of new technologies does not replace human intervention and judgement, it liberates and improves it. It is more about the right way of human and machine interaction which will not replace Compliance Professionals but let them work smarter and in a more outcome based way.

Take away

The impacts of the pandemic continue to evolve.

The changes in both money laundering and terrorist financing activity will continue to evolve. The FATF is developing guidance to help supervisors better assess the risks that the private sector faces. . The ability to adapt to changing circumstances, such as the COVID-19 crisis, is key to effectively detect and prevent misuse of the financial system.

The opportunities from this pandemic are not only for criminals,  exploit it to reform and turbocharged our AML/CFT measures through the use of technology and the application of a smart, intelligence-led and risk-based approach.

The efforts will pay off.