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Episode 31

Coronavirus - Old Crime, New Tricks

Published on: June 12, 2020 • Duration: 7 minutes

Roger Hirst and Phil Cotter, Managing Director of Refinitiv's Risk Business, talk about money laundering and how new techniques are constantly evolving with new technologies because an increasing number of financial transactions are taking place online. Has the rate of change for households and businesses in modern times created greater opportunities for cybercriminals?

  • [00:00:00] Welcome to the Corona Correction Series in association with Refinitiv, I'm your host, Roger Hirst. Money laundering is an old crime, but new techniques are constantly evolving with new technologies because an increasing number of financial transactions are taking place online. But the sheer speed with which households and businesses have had to adapt to this environment during the corona crisis has created even more opportunities for cyber criminals. I asked Phil Cotter, Managing Director of Refinitiv's Risk Business about these trends. 

    [00:00:30] It's estimated that around four trillion dollars a year of illicit funds are laundered through the financial system. And this is funds that are generated through a number of criminal activities, ranging from fraud, through drug trafficking, human trafficking and more recently, things like cyber crime, wildlife trafficking, etc. And of course, around the world, regulators continue to regulate to protect civic society and organizations and vulnerable individuals from being exploited by criminals and criminal gangs, and have a series of regulations around money laundering to ensure that the illicit flow of funds is at least disrupted as much as it possibly can. And so I think, you know as we're going through this pandemic crisis, one of the things we've seen is that criminals continue to innovate and in particular there've been a number of reports from the likes of Europol and Interpol who have pointed out that criminals are taking advantage of the fact that people are working from home, you know, we're obviously using more online access to valuable services such as banking, etc. and so we're seeing a rise in cyber crime activity in attempts by criminal organizations to steal people's credentials and identity, and to use that to impersonate them so that they can get access to their bank accounts. We've seen some really shocking examples of criminals directly exploiting the pandemic, particularly in areas like the supply of personal protective equipment. A number of criminal organizations have set up effectively front companies to be able to gain orders to supply government agencies and then subsequently, you know have defrauded those government agencies by never delivering the goods. And you know I think, if you're involved as a compliance officer or involved in protecting your organization from third party risk and criminal activity, you need to be aware that criminals, as I say, are continuing to innovate and to look for weaknesses in your systems, to be able to use that to their advantage at the end of the day. But, of course, the use of front companies or shell companies is not new. You know in fact recent regulation has required companies to take more steps to ensure that they can identify the ultimate beneficial owner of companies that they're doing business with, because it is one of the ways by which criminals will launder money through the financial system. I mean just recently we've seen that several North Korean and Chinese subjects have been found guilty of using around 20 shell companies to launder about two point three billion dollars of illicit funds, presumably in support of North Korea's nuclear arms program. And as I say you know this is quite a tried and trusted method, we've seen large money laundering is in the past, like the Russian Laundromat, use shell companies to be able to move money around the globe and to hide ultimately the owners of that money and where their ultimate destination is. I think, you know regulators are continuing to look at the landscape and, you know continue to take enforcement actions where they see that companies are not doing enough to protect themselves against financial crime and not doing enough to help to identify and disrupt illicit fund flows. Another area as I said that has been particularly come into focus for regulators is around supply chains, and the EU have also announced recently that they intend to regulate for corporate due diligence during 2021, requiring companies to place more emphasis on the due diligence they do, particularly in areas like human rights and environmental rights. And one of the things at Refinitiv that we've talked about recently is the rise of green crime. And green crime is a term that we use to cover a range of environmental crimes. It could be illegal logging, it could be dumping or it could be wildlife trafficking. All of which, you know, clearly are crimes in their own right that represent an opportunity for criminals to exploit that and to take the money from that and launder it through the financial system. 

    [00:05:39] The sudden shift towards online activity has clearly opened up a large number of avenues for cyber criminals. But perhaps one of the fundamental features of this crisis has been the disruption of existing supply chainsm, and the need to quickly establish new lines for essential goods and services. And it's these that have been heavily exploited by criminal gangs. Policymakers are as ever, also having to adapt to keep up. And this trend towards greater online traffic is probably one of the permanent changes of this pandemic. Whilst online retailers and communication platforms have made all the headlines, the providers of online security software maybe some of the long lasting winners of this crisis. We'll see you later with another update. 

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