Infographic: Understanding Financial Crime Topic19

Understanding Financial Crime

A summary of key concepts, regulations, and preventative measures.

What is Financial Crime?

Any crime resulting in the unlawful change of ownership of property for personal benefit. It can be committed by organized groups, individuals, or even states.

Dishonest Wealth Generation

Creating wealth through illegal means like insider trading or deceit.

Protecting Illicit Gains

Concealing illegally obtained assets to avoid legal consequences, like money laundering.

Types of Financial Crime

Money Laundering

Terrorist Financing

Fraud

Bribery & Corruption

Market Abuse

Cybercrime

Deep Dive: Money Laundering

The process of making illegally-gained proceeds ("dirty money") appear legal ("clean"). It generally happens in three stages:

1. Placement

Introducing 'dirty' money into the financial system.

2. Layering

Conducting complex financial transactions to obscure the source of the money.

3. Integration

The money is absorbed into the legitimate economy.

International Preventative Measures

Financial Action Task Force (FATF)

An intergovernmental body setting international standards to combat money laundering and terrorist financing.

Key Activity: The "40 Recommendations" provide a framework for countries to follow.

The Wolfsberg Group

An association of 13 global banks that develops frameworks and guidance for managing financial crime risks.

Focus Areas: "Know Your Customer" (KYC), Anti-Money Laundering (AML), and Counter-Financing of Terrorism (CFT).

Regional Groups

Organizations like the Asia/Pacific Group on Money Laundering (APG) work to implement FATF recommendations on a regional level through collaboration and peer reviews.

European Legislation Spotlight

Anti-Money Laundering Directives (AMLD)

A series of directives that turn FATF recommendations into law for EU member states.

AMLD 4: Introduced mandatory 'ultimate beneficial owner' registers and stricter due diligence for Politically Exposed Persons (PEPs).

AMLD 5: Extended rules to cover virtual currencies and custodian wallet providers, and enhanced transparency to prevent tax avoidance.

Funds Transfer Regulation (FTR)

Requires payment service providers to include detailed information about the payer and payee in financial transfers to ensure traceability.

Case Study: Combating Fraud in the UK

Contingent Reimbursement Model (CRM) Code

A voluntary code to increase protection for victims of Authorized Push Payment (APP) scams.

Confirmation of Payee (CoP)

A name-checking service to verify that a payee's name matches the account details before a payment is made.

Strong Customer Authentication (SCA)

Requires multi-factor authentication to verify a customer's identity during transactions, reducing the risk of impersonation.