Preventing and detecting money laundering is one of the key problems facing banks, law enforcers, security agencies, and governments worldwide, and anti-money-laundering (AML) technologies are a RegTech hotspot.

But despite the global growth in RegTech, money laundering, terrorist financing, and similar activities appear to growing in some parts of the world – including the UK. Or at least, reports of suspicious activity are.

In 2018, the National Crime Agency (NCA) received a record number of suspicious activity reports (SARS): nearly 464,000 of them, a year-on-year increase of nearly 10 percent, with money-laundering ‘red flags’ up 20 percent to 22,196. However, those flags led to just 40 arrests in 28 cases, according to NCA statistics quoted in the FT today.

The NCA’s annual SARs report was published this week (beginning 7 January) as concern grows that “the City of London is acting as a global laundromat, washing hundreds of billions of pounds in dirty money from around the world, according to official estimates”, said the FT.

Intergovernmental organisation the Financial Action Task Force (FATF) on money laundering believes that the UK’s financial reporting system needs a “significant overhaul to improve the quality of financial intelligence”.

Meanwhile, the NCA has voiced its concern that lawyers and accountants are not raising enough SARs, with the joint number of reports filed by both professions amounting to less than two percent of the global total. By contrast, banks accounted for 80 percent last year.

The news broke as two money laundering controversies hit the banking sector headlines on 9 January.

First, the US brokerage wing of Morgan Stanley was fined $10 million for compliance failures in its own anti-money laundering programme, in which an automated surveillance system did not receive important data from other internal systems. The lapse impaired the firm’s ability to track tens of billions of dollars of currency transfers, according to FINRA, and demonstrated that technology alone doesn’t solve all problems.

In the second, Danske Bank A/S and four former top executives were sued in New York by a US shareholder, which accused Denmark’s largest bank of hiding and failing to stop money laundering at its Estonian branch.

Back in the UK, some believe that Brexit may make matters worse for organisations who seek to root out financial crime. This is because cooperative action in the European Union stands a better chance of tracking the flow of dirty money across borders.

Brussels is seeking tougher European enforcement of AML rules after a spate of recent scandals. The aim, which has growing support from member states, is to give the European Banking Authority greater powers and encourage the convergence of supervisory standards.

For the UK to go it alone, therefore, and enter an extended period of trade disruption and uncertainty, could make the City a magnet for criminal activity.

At present, the UK remains a member of Europol and its searchable database, the Europol Information System (EIS), but its long-term membership of that organisation must be in doubt.

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