Money Laundering Watchdog Turns Focus to Digital Tools, Extremism

The coronavirus halted a wide range of economic activities, but it hasn’t stopped criminals from using the global financial system to commit fraud and engage in other types of illicit behavior. Yet the pandemic has forced some countries to divert resources away from fighting money laundering and made it harder […]

The coronavirus halted a wide range of economic activities, but it hasn’t stopped criminals from using the global financial system to commit fraud and engage in other types of illicit behavior.

Yet the pandemic has forced some countries to divert resources away from fighting money laundering and made it harder for compliance officers in the private sector to detect it, according to the Financial Action Task Force.

The organization, which sets international standards and assesses countries’ anti-money-laundering and counterterrorism-financing policies, has been closely monitoring the impact of the pandemic on its global network, says

Marcus Pleyer,

FATF’s president.

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Mr. Pleyer began a two-year term as FATF’s head in July, about two months after the organization released its first report on the AML and CTF risks posed by the pandemic. In an interview with Risk & Compliance Journal, Mr. Pleyer discussed FATF’s priorities under his presidency. Edited excerpts follow.

WSJ: Has the coronavirus pandemic increased the risk of money laundering?

MR. PLEYER: We see an increase in certain crimes and money laundering patterns. For example, fraud connected with government aid. We see fundraising for fake charities. We see counterfeiting of medical goods. Also, cybercrime.

On the other hand, cash intensive crimes where you need to take cash over the border is certainly something that is decreasing.

What worries me a little bit also is that…there has been an impact on [anti-money-laundering] work in the public sector. We see that in some countries resources are diverted to other areas of government.

We also see this in the private sector. When customers are onboarded, the customer due diligence processes are sometimes not driven at the same level as usual because people are working from home or they have different security measures.

WSJ: There seems to be a growing consensus that the traditional anti-money-laundering and counterterrorism-financing regime isn’t working. How might FATF’s standards evolve to address some of those issues?

MR. PLEYER: There is something that really could change the game, and that is not necessarily a revision of the standards. I think the standards are right. Countries need to implement them fully and effectively, and to make this possible countries should look into—and we at FATF will look into—the digital tools that are out there to promote effective implementation of the standards.

That is why under my presidency we issued a priority on digitization, and we will look into what digital solutions exist and how they can be used for AML-CFT. We will look into possible structural legal technical obstacles and how you can address them.

There is some tension between effectively fighting money laundering on the one side and adhering to data protection. I’m pretty sure if we bring together—and that is what I plan to do—people from the AML area, people from data protection and the technical experts, we will find ways to reconcile these two objectives.

WSJ: Is technology the primary solution to the problem?

MR. PLEYER: You cannot make AML more effective by using digital tools only—you need trained people. So it’s also about human resources, in all the parts of the chain of AML. You need them in compliance, you need them with the supervisors, you need them with the financial Intelligence units, you need them with law enforcement.

This is why I encouraged leaders at the G-20 summit to leave AML-CFT very high on the agenda—to invest in law enforcement and provide them with the necessary human resources. But again, [to provide them] also with the digital resources. It’s always the right mixture between human resources, skills and digital tools.

WSJ: A recent report detailing the contents of leaked U.S. suspicious activity reports appeared to show that banks are identifying a lot of suspicious transactions and suspicious actors, but in many cases they’re continuing to do business with them. What does this mean for the continued fight against money laundering and counterterrorism finance?

MR. PLEYER: This has shone light on the problems we have with money laundering and terrorist financing. A high-level comment on this is that in our mutual evaluations, we also see that there is still a lot of room for improvement for all countries.

I want, especially the G-20, to march ahead and be a model for other countries. All countries need to improve, and all parts in the chain need to improve. We are quite good on this planet with technical compliance, with introducing the standards into the legal framework. But everyone needs to step up their effectiveness.

WSJ: What are your other priorities as FATF president?

MR. PLEYER: One is potentially the fastest growing security and terrorist threat globally, and that is the extreme right-wing terrorism. We have seen a 320% rise in attacks over the past five years. [The number of attacks by such groups in the U.S. from 2010 to 2017] has surpassed the number of attacks perpetrated by terrorist groups such as ISIS and Al-Qaeda. We want to understand the financing behind this, to help us detect and prevent those terrorist attacks.

The other issue I want to stress, because it impresses by magnitude, is environmental crime and its link to money laundering. Up to $258 billion in profit are generated by environmental crimes, and we expect an increase by 5% to 7% annually. By going after these profits, our organization can contribute to several global challenges [including] the protection of our precious ecosphere.

And with this Covid-19 pandemic, we have seen that fighting environmental crime, especially illegal wildlife trade, has a connection to health. We need to preserve biodiversity as a buffer between the world of animals and human mankind.

Write to Dylan Tokar at [email protected]

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