Does Romania need to boost its anti-money laundering toolbox?


Traditionally, banks have been seen as the front line in anti-money laundering activity. They have increasingly been subject to regulatory requirements to check customers, transactions and activity. However, as governments have required banks to make fraudulent activity harder, criminals have evolved their tactics. And the financial sector needs to keep up.

Hidden Insights - Does Romania need to boost its anti-money laundering arsenal
Does Romania need to boost its anti-money laundering toolbox?

As Adrian Niga noted in a recent post, criminals need legitimate businesses to launder money.[1] Al Capone himself, the original money "launderer," put his ill-gotten gains through a chain of launderettes. With banks making life harder, criminals are becoming more inventive. Some of the more recent options for money laundering include the secondhand car market (especially luxury cars), car washes, carpentry businesses, and door and window companies. Any business, in fact, that handles a lot of cash, and where there is price flexibility.

Taking advantage of cryptocurrencies

Criminals have also not been slow to move into new currencies.[2] Cryptocurrencies like bitcoin are obvious targets for money laundering. The transactions may be transparent, but the source of the money is not necessarily checked, and the ultimate owner of a crypto wallet cannot easily be traced. Not to mention that cryptocurrencies can even be mined through the use of powerful computing infrastructure (which in turn can be procured using cash, adding another layer of obscurity).

There are now far more financial instruments available for transactions and investments than ever before. Across Europe and around the world, these need to be subject to the same legislation and regulation as other transactions. These activities may be outside traditional banking systems. But they must absolutely be part of routine monitoring and regulation.

There is, however, another reason why anti-money laundering is becoming increasingly important, especially in Eastern Europe. There are growing concerns that there is more and more money laundering activity in this area linked to Russia. Governments have already started to act to address this.

This is therefore both a legislative or compliance issue and a very real market and operational problem—and it is something that all companies in the financial sector need to consider. It matters to banks, both big and small. But it is also important for stock exchange and foreign exchange services, insurance companies, crypto-companies and exchanges, and others. It should also matter to individual businesses because they are also part of the effort to increase transparency and give money launderers nowhere to hide.

Highlighting concerns and raising awareness

However, there is a problem with this. Most nonfinancial businesses have very little awareness of anti-money laundering. As a general rule, it is fair to say that these businesses find out about legislative requirements either through bringing in consultants or through their own horizon-scanning activity, often via the internet. It is often not a very systematic process and relies on others raising concerns. Governments can – and do –bring in new requirements.[3] But companies often only find out that they are not complying when they are already in trouble.

There are ways to increase awareness. Targeting auditors, for example, may provide an opportunity to raise concerns at audit. Even the internal stakeholders tasked with financial operations could receive information, guidance and advice as part of their dealings with regulatory bodies, banks or other financial institutions, and even technology providers that are already devoting significant effort to combat money laundering.

It is important that businesses take action to protect their shareholders from harm. And that means having the right systems in place to prevent money laundering through the business. This should apply both to large public companies and smaller private companies while recognizing that shareholders of private companies are often far more informed about the business.

Analytics support available today

Are there any easy answers for preventing money laundering? The answer is that we are getting better at it. Both in banks and financial institutions and in other companies, analytics may provide useful insights.

Analytics offers several different options that may be helpful. First, and probably foremost, it provides ways to detect patterns, including new patterns that may suggest new types of fraud or money laundering, practically detecting previously unknown laundering methods. It is also possible to use network analysis to find unexpected links between groups, often a sign of money laundering, and also to compare activity between members of a group to spot abnormal behavior.

Next-generation analytics options now bring together robotics, semantic analysis, natural language processing/analysis and artificial intelligence.[4][5] These can provide powerful tools for anti-money laundering purposes, especially when used in real time – much like it has been done for some time in the case of payments monitoring.

Nobody is suggesting that small businesses, whether in the financial sector or not, should invest in all of these options – and certainly not immediately. In the meantime, there may be interim milestones that are more reachable. However, real-time anti-money laundering is certainly something to which financial institutions should aspire in the medium to long term if they are to remain ahead of criminals and minimize their exposure, either to regulatory penalties or own asset losses.

Join our study

During Q2 2022, SAS – along with our partners K-Businesscom and the Faculty of Economics and Business Administration within Babes-Bolyai University in Cluj-Napoca University – will be exploring sentiment across the business community in Romania. Our objective is to illustrate that the accelerated adoption of anti-money laundering regulations is in fact good for businesses that choose to address this matter proactively. Contact Cristina Beldie if you wish to be part of the study and/or receive the findings.







Tags AML

About Author

Andreas Kitsios

Andreas Kitsios is the Fraud Practice Leader for SAS Greece and Eastern Europe. Within his role, he enables customers across various industries to design and implement Analytics solutions that can help them safeguard their operational integrity, adhere to compliance requirements, and reduce their fraud-related losses. He has extensive experience in the Financial Services domain, through multiple engagements with market-leading customers around Europe. His background also includes several years of experience in software development and consulting services, amassed in prominent global Technology organizations.

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