Viewing financial crime as a security risk

Is financial crime really a security threat, as more and more countries and experts are now saying? And if so, in what sense? And what are the implications for our efforts to combat it?

The issues surrounding the framing of financial crime as a threat to national and international security were a key topic on the agenda of the first international summit of the Global Coalition to Fight Financial Crime (GCFFC) in Stockholm, Sweden, from 10 to 11 September 2024.

The event, themed ‘Accelerating Collaboration’, attracted 140 financial crime fighters from diverse backgrounds, including law enforcement, Financial Intelligence Units (FIUs), civil society, technology companies and banks.

Hans-Peter Bauer, Senior Advisor for AML/CFT and former board member of the Basel Institute on Governance, chaired a panel on financial crime as a security threat, together with:

• David LewisManaging Director and Global Head of Anti-Money Laundering Advisory at Kroll and former Executive Secretary of the FATF;
• Marcus PleyerDeputy Director General of the German Federal Ministry of Finance and former Chairman of the Financial Action Task Force (FATF);
• Ian TennantDirector of the Global Initiative against Transnational Organized Crime; and
• Ilze ZnotinaChairman of GCCFC Europe Chapter and former Head of FIU of Latvia.

The panel discussed whether financial crime can and should be considered a serious threat to national and international security, and what the implications might be for political action against financial crime and the resources devoted to it.

Financial crime causes immense damage

The discussion highlighted how financial crimes cause terrible harm to individuals, societies and the global community. The harm goes far beyond the financial aspect.

Crimes such as corruption and fraud are not victimless, even if their victims are sometimes difficult to identify. Financially motivated crimes such as drug, human and arms trafficking cause immense harm to individuals and threaten the stability and security of entire societies. The same is true for environmental crimes such as illegal wildlife and timber trade, which are now finally being recognized as a form of financial crime.

And as Markus Pleyer pointed out in a follow-up social media post, financial crime fuels terrorist activity and aggression, and fuels conflict. Even in relatively peaceful parts of the world, he said:

“Criminals can use their dirty money to exert economic or even political influence, destabilize social order and undermine our state and economic structures.”

Despite the broad scope of the meaning of the term “security”, the big picture is clear. It is vital to look not only at the monetary aspects of financial crime, but also at the whole chain of actors involved in the crimes and the resulting impact on peace, stability and social cohesion.

High profits for criminals, low enforcement rates

The scale of the impact of financial crime is well illustrated by the GFCCC Information Wall. The latest version shows estimates of criminal activity and the resulting illicit funds across a broad spectrum of crime types.

Yet detection and conviction rates for financial crime remain stubbornly low worldwide. The amount of illicit financial flows intercepted and recovered is estimated to be around 1 percent, as shown in the latest public report from the Basel AML Index.

This divide led the panel – and many in the audience – to agree that a major overhaul of the current system and approach to combating financial crime is needed.

Political implications

One political implication of recognizing financial crime as a security threat is organizationalFor example, Germany has included the fight against financial crime in its national security strategy for 2023. One of the measures is the establishment of a new Federal Financial Crime Authority with powers that go beyond those of a typical FIU.

Other implications may include: new structures to facilitate public-private information sharing on financial crime matters. Legislative reforms may be needed to enable this, and to facilitate the private-private exchange of such information.

The rollout of registers of ultimate beneficial owners could gain momentum if government leaders recognise the importance of ensuring that accurate information about the owners of companies and assets is available to relevant authorities and others with a legitimate interest.

Another positive outcome of recognizing financial crime as a security threat would be a much-needed increase in resources for law enforcement and the judiciary, including following up on cases in which financial institutions report suspicious activity.

Combating financial crime is not an end in itself

The conference topics showed a clear recognition that Tackling financial crime is critical to addressing some of the world’s biggest challenges.

In addition to the panel on financial crime as a security risk, participants delved deeper into modern slavery and human trafficking, trade-based financial crime, dealing with mercenaries and private militaries, information sharing through public-private partnerships, balancing data privacy concerns, and how to improve the effectiveness of anti-money laundering supervision.

The energy and dynamism in the room also showed the value of bringing together leading voices from around the world to discuss important emerging issues and reach consensus where possible.

We are proud to have been a member of the Global Coalition since its inception and to have participated in this first global conference. Congratulations to the organizers, especially John Cusack and Che Sidanius. There was a lot of interest in making this an annual event – ​​so we look forward to being there again in Stockholm 2025!