Financial Crime Risk Management in the Headlines: Protecting Both People and Assets

Human Trafficking in the Mediterranean & Southeast Asia: Human trafficking is a known problem worldwide. However, just recently, it has again become a leading news story as the result of two geographic hotspots. First, Mediterranean, African, and Middle Eastern refugees have been suffering -, and in some cases drowning – as they escape economic uncertainty, civil unrest, and war, by fleeing from North Africa to Italy. This has been going on for a few years, but the situation seems to have gotten much worse in the past few months. European countries are struggling to deal with it and it touches on immigration, and conflict zones. But, it is heavily banking-related, too, with respect to how smugglers transfer monies and launder their cross-border money movements associated with their illegal activities. Second, in Southeast Asia, human smuggling and trafficking has been a main topic of discussion with regard to the Rohingya refugees. There, too, money laundering has often emerged in the context of this unfolding human tragedy.

Reminders of the 2010 NASDAQ “Flash Crash”: You may recall that on May 6, 2010, the NASDAQ crashed roughly 600 points and that US regulators have been investigating it ever since. Navinder Singh Sarao, the British trader accused of helping cause this incident is now being accused by U.S. authorities as having illegally earned $40 million with his trading, specifically by taking advantage of a market manipulation technique called “spoofing.” He recently said that he had “done nothing wrong” and “I am just good at my job.” This once again points to the need for comprehensive and powerful market surveillance coverage across markets, asset classes, and trading venues of all types, something that regulators continue to target and pursue.

Money Laundering Patterns & FIFA: The allegations and revelations about fraud, racketeering, and other forms of corruption inside FIFA (Federation Internationale de Football Association) are truly astonishing in scope and duration, supposedly having gone on for more than 20 years and encompassing $150 million or more. Patterns of certain financial transactions – be they payment amounts, payees, withdrawals, or other patterns – are also classic money laundering detection mechanisms that should’ve helped to detect some of these violations much sooner than they were. It’s notable that specific financial institutions are not (yet?) being accused of anything, but that observers are openly asking whether or not those institutions should have somehow detected these patterns of high-risk activities.

Currency Transaction Reporting & Dennis Hastert: The former Speaker of the U.S. House of Representatives, Dennis Hastert, was accused of sexual misconduct that was evidently noticed by law enforcement as a result of Hastert’s attempts to avoid the currency transaction reporting requirements that form a key element in how financial institutions track possible money laundering. Evidently, some reports thought he was withdrawing the money due to extortion. One article covering the situation explained that Hastert had made a regular series of withdrawals in the 2010-2012 period that initially led bank officials to start asking questions of the former Speaker.

Money Laundering via Silk Road: Silk Road’s founder and creator, Ross Ulbricht, was sentenced to life in prison recently, thus reminding us of his earlier arrest back in 2013​ and yet again placing a spotlight on money laundering issues associated with illicit activities. The specific case remains on appeal, but it touches on numerous topics related to financial crime such as cryptography, virtual currencies, privacy, drugs, anonymized payments, and more.

So when you think about the world of financial crime risk, it is unfortunately quite easy to connect this topic with many of today’s headlines. Clearly, money laundering, market manipulation, bribery and corruption, and other similar criminal activities have moved front-and-center in the past several weeks. This bad news reminds us why risk management is such an important discipline to financial services organizations and not something that is merely focused on digits and currencies. In fact, the important fact is that human lives are deeply and personally impacted by how well we all do – or do not – detect this malicious activity. Our job is not just to protect assets and organizations; financial crime risk management also protects people.