Written by Jake Plenderleith on Tuesday October 20, 2020
It is generally acknowledged that great strides forward have been made over the last decade in the fight against money laundering and financial crime. Few, however, would claim that there remains little to be done. But a remarkable new report by BAE Systems demonstrates just how far we have to go. The report exposes in stark detail firms’ financial crime vulnerabilities, vividly illustrating the worries and concerns of financial crime and compliance staff, and why there can be no room for complacency.
The report quizzed almost 500 compliance and risk professionals on their attitude and perspectives on financial crime within their organisations. It also grilled 6,000 consumers using financial services firms’ products. The responses were frank and eye opening, most notably with regard to human trafficking.
BAE Systems’ report identified a string of significant findings.
Such findings might be unsurprising to those working in financial services. But, in addition to the ethical imperative to combat human trafficking, what was perhaps most interesting about the report was the reputational aspect of such ethical crimes. The report found that 75% of customers would drop their bank or financial institution if it did not demonstrate a proactive attitude to fighting money laundering, or the unethical practices that facilitate it. Note the importance of this feedback: customers are willing to walk away if a proactive approach is not taken by firms; mere words are, for three-quarters of customers, inadequate.
To their credit, financial services professionals recognised this. According to the report, the impact on the industry and reputational damage were the top two concerns for those working within financial services. Worryingly, the human cost of the criminal activity came in at only number six. In terms of money laundering offenses that cause professionals to worry, human trafficking ranked lowly (eighth). There’s an obvious discrepancy here. More than a third of all staff in financial institutions aren’t confident of spotting human trafficking red flags, and yet it doesn’t rank highly in their list of concerns.
Obviously, this doesn’t mean that financial services professionals don’t care about human trafficking – it’s just that some, most of the time, don’t feel they possess the tools to be able to detect it. The problem is that if this continues, then, as the report reveals, customers are overwhelmingly willing to find another institution with which to do business.
Overall, the report’s findings leave us with three issues to resolve in relation to human trafficking.
Human trafficking forms just one part of the bigger issue of ethical crime; wildlife trafficking, labour and sexual exploitation and domestic servitude are the other elements that fall under this unhappy umbrella. Illicit trafficking in stolen goods and sexual exploitation were both mentioned as being among those crimes having a big impact on financial institutions. If you consider the growing ethical stance taking by an increasing number of customers, one begins to see just how much of threat such ethical crimes pose – damaging the environment and wildlife, ruining lives, deleterious to society and harmful to financial institutions.
Combined, ethical crimes represent an intimidating challenge to compliance professionals and those working within financial institutions. The International Labour Organization (ILO) estimate, for example, that there are some 40 million individuals who have fallen victim to human trafficking worldwide. Given the size of the problem, and the reported lack of confidence of some employees in financial institutions to detect and prevent it, is it then fair to say that human trafficking specifically is something of a blind spot for those in financial services?
For staff in financial institutions, the obligation to report is of course a legal requirement. But if a sizeable number of staff admit they are not confident of spotting human trafficking red flags, then this obligation is somewhat redundant (if individuals can’t spot a red flag, there naturally won’t be a report to submit). This brings us to the nub of this issue – how do we help financial services professionals spot red flags?
First, we should recognise that it is not the sole responsibility of those in banks and financial institutions to tackle it. Members of the public, charities, law enforcement, governments and international bodies each have within their power a number of things they can do to reduce it; those in financial institutions should not feel that the burden is theirs alone in this fight. But what they must understand are their professional responsibilities, the legal requirements and the knowledge and skills needed to be able to identify when it is potentially taking place.
The last of these three seems the most pertinent given the feedback from the BAE Systems report. The answers demonstrated that staff know it is problem and recognise that it may be costing their firms financially. If these employees are in possession of the tools, knowledge and intelligence required to spot human trafficking red flags, then their confidence in spotting potential activity will be much higher.
As with many things, it appears education and training sit at the heart of making progress. There is a lot riding on us getting this right.
 BAE Systems, ‘The global state of anti-money laundering: What consumers think and why it matters’: https://www.baesystems.com/en-financialservices/insights/the-global-state-of-anti-money-laundering – accessed October 2020
 International Labour Organization, ‘Forced labour, modern slavery and human trafficking’: https://www.ilo.org/global/topics/forced-labour/lang--en/index.htm – accessed October 2020
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