With potentially hundreds of billions of pounds in illicit funds flowing through its economy each year, the UK lies at the heart of the fight against financial crime. Despite significant investment, anti-money laundering (AML) enforcement successes are limited. The banking industry alone spends some £5bn per year1 on people and systems to track and report criminals and money flows, yet only a very small fraction of laundered money is ever recovered.

This report investigates how well frontline, regulated firms feel the UK’s AML regime works.  It also gauges the level of commitment to stamping out money laundering, from the C-suite to branch office.

The survey, conducted by The Economist Intelligence Unit on behalf of LexisNexis® Risk Solutions, details where the risks lie and how government policy, regulation, internal procedures and technology can best be deployed to ensure the private sector and enforcement agencies can counter flows of dirty money in, around and out of the UK.

The Economist Intelligence Unit is grateful to the following senior AML executives from across the banking and financial technology sectors for their thoughts and insights.

• Brian Dilley, group director of fraud and financial crime prevention, Lloyds Banking Group
• Paul Kilbride, chief compliance officer and money laundering reporting officer,  Secure Trust Bank
• Erik Morgan, managing director, global due diligence, governance and regulatory solutions, RBC Investor & Treasury Services
• Ben Steyn, head of compliance, Transferwise
• Natasha Vernier, head of financial crime, Monzo Bank

Executive Summary
 

The growing threat of money laundering

Evolving criminal methodologies are the single biggest risk in the UK’s fight against money laundering according to 24% of respondents. Money laundering is clever, technologically adept and changing fast in the digital world. Although the UK’s AML regime is responding to these threats, it is still unable to completely stamp out financial crime.

The Appetite for Battle

Inconsistent AML controls across industries (cited by 42%) and a confusion of regulators (24%) often leave companies feeling they work in silos (46%). Regulated businesses are uncertain about where to direct their concerns and whether the information provided by their Suspicious Activity Reports (SARs) is used. The return on investment from their AML compliance, with costs rising, is hard to evaluate. Even so, banks, financial technology (fintech) firms, lawyers, estate agents, accountants and the gambling operators want to do more, but feel they lack appropriate guidance.

Preparing for combat

Respondents want clearer (36%) and more frequent (30%) communications between regulators and regulated business. Regulated firms need to adopt a zero-tolerance approach, through training and a company-wide focus on detecting and reporting suspected financial crimes. Government and enforcement agencies, notably the National Crime Agency (NCA), need to help frontline firms and staff, particularly as laundering methodologies change rapidly in the digital world.

Clearing the obstacles

Nearly a third of respondents believe better monitoring and reporting of enforcement outcomes would be the most efficient way to boost AML. Hundreds of thousands of SARs are submitted, at substantial cost to regulated firms, but their quality is questionable,  while crime agency units are too overstretched and under-resourced to efficiently make use of the information. Other conflicting rules and legislation, on data, confidentiality and collaboration, could be reworked.

Communicate, co-operate

According to respondents, increasing information sharing between company departments (42%) and between regulated businesses (37%) is the key to better AML. Money laundering teams should be able to share their suspicions earlier with their peers and across sectors, if they are to successfully eradicate criminal activities. Legislators and regulators should be more transparent and realistic in their guidance on best practice and in the use of technologies designed to track transactions, individuals and unusual behaviour.