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2019 – the year money laundering hit the headlines big time

This year has seen the bloodiest fight yet against financial crime

Julian Dixon
December 31, 2019

This year has seen the bloodiest fight yet against financial crime. For many, 2019 will be a year they’ll want to forget. Targeted investigations, record fines and PR-crisis inducing press have been dominant themes. To round the year off, we look at the most significant headlines of 2019.

Criminals are using Fortnite to clean money obtained from stolen credit card details.

1. Online gaming a new way to launder money

The year kicked off with the news that criminals are turning to Fortnite to clean money obtained from stolen credit card details. Fortnite is an immensely popular online game which has in-game currency known as V-bucks.

Cybersecurity expert, Benjamin Preminger, of Sixgill said: “While completely stopping such criminal activity is extremely difficult, several steps could be taken to mitigate the phenomenon, including monitoring the transfer of high-value goods in the game, identifying players with large stockpiles of V-bucks, and sharing data with relevant law enforcement agencies.” Fortnite has more than 250 million registered players and made $3 billion profit in 2018.

2. Money laundering gains more profile

Money laundering costs the UK an estimated £24 billion a year and yet it’s a crime that’s often little understood by the public. But this year we’ve seen a dramatic shift. Money laundering has been frequently in the news. We’ve seen it making hot book topics (check out Moneyland and Billion Dollar Whale) and the 'big' screens (The Laundromat).

Money laundering has also been the subject of BBC Panorama investigations, which will have substantially increased public awareness. Money laundering is finally being better understood, which can only have a positive effect on the fight to beat financial crime.

3. UK government publishes Economic Crime Strategy
Published in July by the UK Government, the Economic Crime Strategy sets out an ambitious three-year agenda for tackling economic crimes like money laundering and terrorist financing. Despite current efforts, these crimes are still rising in frequency and value.

Among 52 action points, the plan outlines the importance of public-private partnerships, new technology and transformation of the SARs regime. It follows recommendations from the Financial Action Task Force (FATF).

4. Regulatory pressures become wider and stronger than ever
The money laundering regulations affect many sectors and this year has seen professional bodies outside the banking sector taking action to ensure members are compliant. The Solicitors Regulation Authority, for example, found that nearly a quarter of the 400 firms it approached in 2019 were not compliant with 2017 regulations. It consequently set out an extensive programme of targeted, in depth visits.

HMRC also launched its campaign, Flag it Up, which aims to tackle money laundering in the UK and is targeted at the accountancy, legal and property sectors.

Estate agents haven’t been immune from the regulatory pressures either. HMRC has been conducting unannounced inspections on businesses suspected of trading without being registered as requited under the money laundering regulations. Countrywide Estate Agents received a £215,000 fine.

5. Banks swim in shark-infested water
2019 has seen a long list of banks making the headlines for one money laundering/compliance scandal or another. Danske Bank’s €200bn money laundering scandal (one of the world’s biggest) has dominated headlines. It’s investor confidence, customer trust and market value have all unsurprisingly taken a big hit.

And there’s many more that have fallen short of regulatory compliance. Standard Chartered, Nordea, Swedbank, Rabobank, Santander, ING, BOV and Westpac, for example, have all made headlines for the wrong reasons. Some of the issues put to blame include deficiencies in screening and transaction monitoring systems. 

6. All go for crypto
2019 has been a big year for cryptocurrencies. The news of Facebook’s new global currency, Libra, has made the world sit up in the realisation that cryptocurrency has the power to completely and imminently change global finance.

Starbucks (among other retailers) also announced it now accepts Bitcoin, reflecting increased business confidence.

At the same time, the big changes the 5th Anti-Money Laundering Directive (5MLD) brings for crypto have been edging ever closer. The regulatory pressures are mounting. Compliance with the money laundering regulations is essential for all cryptocurrency companies from 10 January 2020. While this may be seen as a burden by some, it will only help drive the legitimacy of this transformational currency.

7. Monzo gets a digital black eye
Monzo might be the fastest growing bank in the UK, but October was a rough ride following a report from the BBC’s Watchdog Live, which revealed customer’s accounts have been wrongly frozen. The news that customers have been reportedly left without money to buy food or pay their rent has been widespread and damaging.

Like many other digital challenger banks, Monzo is reported to be struggling to keep its compliance procedures in line with its rapid growth. Excessively high levels of false positives in its screening processes are the likely reason behind its issues.

8. Apple faces the consequences of faulty screening
In 2015 Apple’s sanctions screening tool failed to match different upper and lower case letters that appeared in Apple’s system and on the OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN list).

Fast forward to 2019 and the squeaky clean tech giant has agreed to pay $467,000 to settle violations of the Foreign Narcotics Kingpin Sanctions Regulations, after it failed to detect a sanctioned company and its owner. This was an embarrassing blunder for the world’s most valuable brand.

9. Businesses feel the force of the money laundering directives
We’re now less than a month away from the 5MLD being implemented into national law on 10 January 2020. This is the date from which compliance is necessary for all obliged entities. 5MLD brings many changes to tackle money laundering. This includes the requirement for more sectors to comply (including high value art dealers and prepaid cards, for example), for more enhanced due diligence and for less prepaid card anonymity.

The 6th Anti-Money Laundering Directive (6MLD) follows close behind, mirroring just how fast-paced financial crime and the associated regulatory environment is evolving to be.

10. Compliance fines soar
Historically, the UK’s fines for non-compliance have been rather meek compared to the US. But this is beginning to change. Financial Conduct Authority (FCA) fines for this year have increased six times, having reached £391.8 million so far.  

The reasons behind the fines vary but the biggest fine of the year (£102 million) went to Standard Chartered for its poor AML controls. This is the second largest financial penalty for AML controls failings ever imposed by the FCA. Standard Chartered did not dispute the FCA’s findings, allowing it to qualify for a 30% discount. The FCA would have otherwise imposed a financial penalty of £145,947,500.

HMRC also dished out a record £7.8 million fine to Touma Foreign Exchange. The money transmitter ignored money laundering regulations and breached rules relating to risk assessments, policies and procedures, customer due diligence and more.

The US tells a similar story with sanctions compliance fines reaching a decade high. 

11. RegTech industry under transformational change
“The pace and volume of [regulatory] changes make it nearly impossible for a company to rely only on its internal resources or traditional methods to stay compliant. As a result, companies have begun to invest in RegTech [Regulatory Technology].” 

This market segment, which is part of the broader Fintech (financial technology) sector, has seen significant growth during 2019 for many reasons. These include RegTech’s ability to make businesses more efficient, modern and productive.

A report by KPMG estimates that by 2020 RegTech is expected to make up 34% of all regulatory spending, up from 4.8% in 2017.”

12. Napier recognised in the Top RegTech 100 list for 2020
Last but not least … we’re clearly biased but no summary of 2019 would be complete without squeezing in a mention of our latest achievement. We’re very proud to be ranked amongst the top 100 of the world’s most innovative RegTech companies. We earned our place because our technology is empowering compliance teams to make better risk-based decisions with unprecedented speed and accuracy.

2019 has been a big year for compliance.

But have we missed anything? What do you think were the most significant highs and lows? We’d love to hear your thoughts. Join the conversation on Twitter and LinkedIn.

Julian has more than 20 years of financial services experience gained at major investment banks including Deutsche Bank, JP Morgan and Commerzbank. His roles have ranged from front-office sales leadership to private equity. Julian has extensive knowledge of financial services processes and technology.
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