In the new digital economy, with the advent of digital banking and cash management, criminals have perfected the art of moving money across continents at the speed of light, and technological advances have made it difficult for law enforcement agencies to address these activities. If money laundering were a country, it would be the fifth-largest economy in the world, representing 3% of global GDP, estimated at US$2 trillion by the United Nations Office on Drugs and Crime.

Fraud and money laundering aren’t particularly nascent phenomena, but the Internet has been the biggest game-changer in the fight against financial crime. In the present world, money can be transferred and withdrawn without any corresponding trace variable, such as an IP address. The Internet enables malicious actors to evade detection through the anonymity afforded by online payment services, peer-to-peer transactions, virtual currencies (cryptocurrencies), and proxy servers, among other methods.

Surprisingly, the actors in the fraud-value chain are not only hackers and drug cartels but also willing conspirators (decision-makers) within the financial services industry who offer such illicit services in exchange for substantial commissions. Beyond the surface, the impact of dirty money in society cannot be overstated—it’s used to fund conflicts worldwide, and money laundering in particular helps shore up property prices in major cities.

There have been solutions and organisations put in place to mitigate these, such as the Financial Action Task Force, an anti-money laundering body tasked with assessing global anti-money laundering effectiveness. According to their Effective-O-Meter, the average anti-money laundering stands at 32%. In retrospect, this means that most countries are doing a very poor job of preventing corrupt individuals and their industry collaborators from stealing money and getting away with it.

In recent times, we have been hit by scandals, including but not limited to how individuals use offshore shell companies to hide corporate governance and ownership information, a bank rip-off that led to a major money laundering scheme, a sovereign wealth fund scandal, and how an international organisation, FIFA, was enmeshed in financial controversies. No one is immune to these threats in a rapidly changing global financial landscape.

Criminal actors are consistently exploring new ways to exploit gaps in legitimate channels to launder their illicit proceeds as legal tender. To address this challenge, strategies must evolve, and there must be collaborative efforts among the financial services industry, technology specialists, and the government. In the grand scheme of things, it is very pivotal to understand the motivations and modus operandi of the individuals who engage in dirty money trade. When businesses understand their enemies and their strategies, they can better protect themselves.

DIGITAL SOLUTION

The rapid technological growth has benefited anti-money laundering efforts but has also imposed burdens, hence the dichotomy. On the one hand, it provides insights, scope, and scale for investigation and management; on the other hand, it can be layered and cumbersome due to the lack of interplay between legacy technology solutions and products and more recent technologies. Amid the persistent “noise” in the cyber arena, two new technological phenomena can redefine how financial crime is tackled: blockchain and machine learning. These technologies can be deployed to build synergy across internal and external third-party data sources and to validate the link between transactions and entities.