Anti-money laundering involves more than just banks

Read the full article in Swedish on Realtid

Why don’t banks actively communicate to the wider world what they’re doing to counter money laundering? According to Otto Barnekow, expert in regulatory transformation at PA Consulting, they should be encouraged in the same way as private individuals investing in ethical funds.

The United Nations Office on Drugs and Crime (UNODC) estimates that between two and five per cent of global GDP is ‘washed’ each year. In Sweden, there is no clear estimate of the extent of money laundering today, but the Money Laundering report from 2013 put the figure at SEK 130 billion per year. That figure is certainly much higher today.

The cost of money laundering and terrorist financing is significantly higher for our society than for the companies that have violated regulations. The effect of ineffective methods of combatting money laundering and terrorist financing is that the financial motive for committing crimes remains. Drug trafficking, arms trafficking, human trafficking, prostitution, corruption and fraud can continue to develop. Those who engineer these crimes become wealthy and can finance more crimes. They become role models for younger criminals and thus the crime attracts new players. Most people feel great concern about the development and what is happening right now on Swedish streets and squares. In the long-term, democracy, public security and confidence in the financial system are threatened.

But there is knowledge about what needs to be done to strengthen the fight against money laundering and terrorist financing. There are a number of measures being taken based on the regulations, collaborations and routines our society already has. 

But work on money laundering and terrorist financing does not only involve banks. The money enters the financial system in many ways and through many channels. Only a small part of all reporting companies in Sweden report to the financial police. And few non-financial sector operators report suspicion of money laundering or terrorist financing, according to the National Risk Assessment of Money Laundering and Terrorism Financing in Sweden 2019.

Cooperation and effective information sharing between authorities, inspections and the companies involved in anti-money laundering need to be significantly improved. In Sweden alone, 18 authorities are involved in the work against money laundering. Increased access to information and knowledge is necessary for both the companies and authorities concerned. At international level, clarification of responsibilities between EU member states regarding international money laundering is also necessary.

Already, huge resources are being invested in many companies to comply with current regulations in this area. However, just following the applicable regulations and legislation is a hygiene factor. The work to prevent money laundering and terrorist financing should be as obvious as a company devoting resources to other sustainability work. Counteracting money laundering is one of the most important things a company can do to take social responsibility. Being legislated should not mean a lower level of attraction than other community-oriented efforts.

Why is a bank being able to communicate that they are doing everything possible to counter money laundering not an indicator of success? For the same reason that people buy ethical funds or choose companies that allocate profits to sustainability projects, companies that actively counter money laundering should be encouraged.

The current debate places a great deal of focus on combating negative behaviour rather than encouraging positive ones. It could change. Encouraging positive behaviour in the work against money laundering and terrorist financing will benefit our society in the long run. As with the climate issue, the most important thing is that everyone contributes, not just those who are affected by legislation and regulations. You and I can also make a difference by favouring the companies that are active in their efforts to counter money laundering.

It is important for banks and other companies to change their objective from meeting anti-money laundering and terrorist financing regulations to helping counteract the financial motives for crime.