The global system for combatting financial crime is hugely expensive and largely ineffective

Another bank is preparing to face the music over alleged failings in its efforts to curb flows of dirty money. NatWest, one of the UK’s largest lenders, is set to appear in court in London to respond to charges that it failed to properly scrutinize a gold-dealing client that deposited £365m with the bank—£264m of it in cash.

NatWest (which has said it is co-operating with the investigation) is the latest in a long line of banks to be accused of falling short in the fight against dirty money. 

In 2020 global banks were fined $10.4bn in penalties for money-laundering violations. This is an increase of more than 80% on 2019. 

In January, Capital One, an American bank, was fined $390m for failing to report thousands of suspicious transactions. 

Danske Bank is still dealing with the fallout of a scandal that erupted in 2018. Over $200bn of potentially dirty money was washed through the Danish lender’s small Estonian branch while executives missed or ignored a sea of red flags.

Closer examination suggests that the global anti-money-laundering (AML) system has serious structural flaws, mainly because governments have outsourced to the private sector much of the policing they should have been doing themselves. 

Read the full article on The Economist HERE

Libra Cryptocurrency could be in danger, as Mastercard, Visa and Ebay pull out

Facebook’s cryptocurrency Libra took a major hit last Friday, when Mastercard, Visa and Ebay left the Libra Association, who supervises the project. Stripe and Argentina-based Mercado Pago have also left the initiative.

On Monday, the companies who are part of the Libra Association will formalize their participation in the initiative. Companies such as Visa and Mastercard may have second thoughts, as global regulators have raised concerns about the project.

Earlier this month, PayPal also left the Libra association. The departures mean that Libra no longer has the support of any major digital payment company.

Despite these setbacks, Dante Disparte, the head of communications at the Libra Association, has said that "We are focused on moving forward and continuing to build a strong association of some of the world's leading enterprises, social impact organizations and other stakeholders" and that membership of the association may grow and change over time.

Last Wednesday, French finance minister Bruno Le Maire said that Libra should not be developed in the European Union and said, "it should not be the role of a private company to try and get a sovereign currency like a sovereign state."

Valdis Dombrovskis, the Executive Vice President-Designate of the European Commission, also said this week that Libra needs to be tightly regulated to preserve monetary stability and to prevent money-laundering operations.

In the U.S., Federal Reserve Chairman Jerome Powell said earlier this year the cryptocurrency raises "many serious concerns regarding privacy, money laundering, and consumer protection." Treasury Secretary Steve Mnuchin has also said that the currency could be used to finance terrorist operations, and that it represents a "national security issue."

Libra was unveiled by Facebook in June, and was touted as a digital currency that can be managed from one's phone. The cryptocurrency is particularly directed at the 1.7 billion people on the planet without access to a traditional bank account.

A market is springing up for “regtech”, fintech’s nerdy new offspring

"On September 29th, IBM announced the purchase of Promontory, a 600-strong consultancy whose senior staff include former officials from the Federal Reserve, the World Bank, the Securities and Exchange Commission and other regulators. The hope is that person and machine will combine into a vast business. Promontory was founded in 2001 by Eugene Ludwig, who had headed one of America’s primary bank-supervisory agencies. It grew first because of the slathering of new rules during the previous, Bush administration and then prospered, says Mr Ludwig, as this process expanded under Barack Obama".

Read the full article in The Economist

Is Too Much Regulation Bad?

Too much regulation ‘hampers fight against financial crime’

From GT News –

“A growing regulatory burden, increased personal liabilities on compliance professionals, barriers to greater collaboration and evolving criminal methodologies represent the most significant challenges to banks’ ability to combat financial crime.

The finding is part of the newly-published Future Financial Crime Risks report, produced by analytics group LexisNexis Risk Solutions with support from the British Bankers Association (BBA). The report provides a review of financial crime and its evolving risks.”

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