European banks face an increasingly complex environment as criminals exploit the highly interconnected and real-time nature of the global payment system to move funds on a massive scale. This cross-border illicit funds movement, or the flow of illegal funds from one country to another, allows criminals to obscure the money trail and complicate recovery efforts. Now, our new report, Financial Crime Insights: Europe, has uncovered staggering new insights into the scope of this problem.
Cross-Border Illicit Activity: A $194.9 Billion Problem
Cross-border transactions have tripled in the last decade, signifying a growing exchange of funds between countries in an increasingly complex global financial system. In this highly interconnected environment, criminals are abusing these payments to circulate the proceeds of heinous crimes such as human trafficking, terrorist financing and drug trafficking throughout Europe.
Our new research quantifies this threat at an estimated $194.9 billion, comprising over a quarter of all money laundered across the continent and posing a significant risk to the European financial system. With a combined total of $115.4 billion, Germany, France, Italy and the UK represent more than half of all cross-border illicit funds, with the rest of the European Union and Spain contributing another $37.1 billion to the issue.
These astounding numbers prove that financial crime is not bound by banks or borders — and that the industry must respond accordingly with an approach that provides a complete picture of risk across payments and country lines.
Improving Fraud Detection with a Consortium Approach
As Europe and the G20 endeavour to improve the speed, transparency and cost of cross-border payments to promote growth and trade, criminals may be emboldened to move illicit funds across borders more than ever. These threats to the integrity of Europe’s financial system underscore the pressing need to prioritise effective fraud prevention measures. A consortium approach can help break down siloes that hinder anti-financial crime efforts across banks and borders and create a step change in financial crime fighting efforts across the continent.
Consortium analytics provide essential insight into payee risk for more effective payments fraud detection with fewer false positives. As payments fraud evolves and begins to outpace the effectiveness of conventional controls, a consortium approach can help investigators better assess the risk associated with a payment, even if the risk falls outside of their institution — or the country. By removing barriers and greatly strengthening fraud prevention, a consortium approach may prove essential for the European financial industry to disrupt the movement of illicit funds across institutions and borders.
Financial Crime Industry Solutions for Cross-Border Illicit Activity
Now is the time for industry stakeholders across Europe to take collective action in the fight against financial crime and cross-border illicit activity. Without a united front, criminals will continue to exploit the interconnected nature of the financial system to circulate funds for international criminal organisations and money laundering networks, move the proceeds of drug trafficking and fraud, and facilitate terrorist and proliferation financing. A unified front involving all stakeholders — regulators, supervisors, law enforcement and banks — as well as a consortium approach to detection is essential to effectively combat these illicit cross-border flows.
With collective effort, a shared vision, and an innovative mindset, the industry can work together to combat cross-border illicit activity and create a more resilient future for the European and global financial systems.
