Wanted: Banks to Join the Front Lines in the Battle Against These Financial Crimes

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Disrupting the flow of dirty money to criminal elements is key to reducing the global threat posed by three despicable practices: modern slavery, terror financing and illegal wildlife trade.

Modern Slavery

More than 200 years after Great Britain abolished the slave trade, and 155 years after the United States followed suit, the idea of human bondage existing anywhere in our enlightened world is near inconceivable. And yet this miserable business persists. Modern slavery takes many forms, including the traditional definition of the word, in which ownership is exercised over a person, as well as human trafficking, forced labor and restrictions on freedom.

Incredibly, more than 40 million people are enslaved around the world, according to the United Nations’ International Labour Organization (ILO).1 Around 60% are in forced-labor situations in the private sector. And, like other financial crimes, profit is a driving force. Human trafficking is one of the most significant generators of criminal proceeds on earth, with revenues soaring from $31 billion in 2011 to $150.2 billion in 2018, according to ILO estimates.2

Fortunately, governments, financial institutions, investors, charities and other organizations are taking major steps to stamp out trafficking. In 2015, for example, the British government successfully pushed for the establishment of the first UN target for putting an end to modern slavery.3 It forms part of the UN’s Sustainable Development Goals and requires governments to take effective measures to eradicate modern slavery and human trafficking by 2030.4

More progress needs to be made, however. Banks, as financial institutions, bear heightened responsibility. They must use their position in the payments system to strengthen their anti-money laundering checks, keep a careful eye on financial data and report any unlawful profits and proceeds — all with an eye to applying more pressure on traffickers and tearing their business models apart.

Such responsibility requires greater efforts. But it can be done. To learn more about the issue and how banks are ramping up the fight, read FTI Consulting’s report, “Battling Financial Crime and Modern Slavery.”

Terror Financing

Terrorist groups are spawned by a broad range of ideologies. And they come from many sectors of society — the extreme left, the extreme right, nationalists and, on a less violent scale, even animal rights activists. Often one group will seize the world’s attention for a time through spectacular or high-profile acts that unsettle the public. The militant Islamic group ISIS, which claimed responsibility for the London Bridge stabbings in November 2019 that left two dead, is a prime example.5

Despite their differences, the more dangerous groups have several key things in common: extreme viewpoints, violence and illegal methods of financing, such as theft, kidnapping for ransom, and money laundering. Combatting the financing of terrorism is, therefore, a major priority for governments around the world, one that is coordinated by the Financial Action Task Force (FATF) based in Paris.

Terrorist financing may come from the West through mainstrain sources such as social security.

FATF provides details on the traditional financing techniques used by terrorists, such as diverting funds from nonprofit organizations and committing fraud, robbery and other crimes, with the proceeds laundered through the banking system. It also details emerging techniques, including self-funded foreign terrorist fighters (FTFs) and financing from the West through mainstream sources such as employment income, social security and bank loans.6

Governmental and organized legal authorities cannot fight this battle alone, however. Banks and other financial institutions through which terrorist financing is channeled must be able to interpret and implement the laws and rules in an operational environment. They must also be genuinely committed to fighting crime in all its forms, starting from the board of directors and going all the way through to customer interaction.

To do this, a combination of measures is needed: better technological and procedural controls, more staff training and tighter regulatory compliance. Information sharing between banks and the authorities is a must. How can this best be managed?

Read FTI Consulting’s “Battling Financial Crime and Terror Financing” for additional insights.

Illegal Wildlife Trade

The killing, butchering and harvesting of animals for their horns, teeth and other body parts is a heinous crime that stains humanity. Beyond the cruelty, it robs countries of animals from their habitats, spreads disease and is driving some species to extinction. It undermines the economies of developing countries as they are stripped of their natural resources.

As a multibillion-dollar enterprise, the mass trafficking of wildlife is not only illegal but has been cited as a possible source of the coronavirus pandemic.

Appealing to our better nature to try to curtail illegal wildlife trade is commendable but unrealistic given the potential for profit. The practice is estimated to be worth up to $23 billion a year according to a joint report from the UN Environment Programme and Interpol.7 That makes illegal wildlife trade the world’s fourth-most-lucrative trafficking industry after drugs, humans and weapons.

Steps have been taken to fight back, however. Globally, wildlife trade is regulated through the 1975 Convention on International Trade in Endangered Species and Flora (CITES), to which 183 countries are signatories.8 TRAFFIC, a UK-based nongovernment organization dedicated to tracking illegal wildlife trade and understanding motives, works with enforcement agencies to disrupt the complex wildlife smuggling networks.9

Choking the ability of poachers and traders to move money is an essential component in stopping this practice. A growing recognition of this, and an acknowledgment of the important role banks and other financial institutions can play in disrupting the flow of finance from these illicit activities, has brought together conservation organizations, governments and global corporations to work collaboratively as a combative force.

When profit is the motive, however, it is always a struggle to stop criminal activity. Still there is reason to believe that illegal wildlife trade can be curbed if banks ratchet up their anti-money laundering controls. Follow the money, and we can do a better job of protecting — and preserving — those who share the planet with us.

FTI Consulting’s “Battling Financial Crime and Illegal Wildlife Trade” looks at other measures being taken in the fight and how banks can best use the tools at their disposal.

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