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5 Financial Crime Highlights of 2022: what we can learn from scandals and events

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2022 was a year full of financial crime relevant news; from the invasion of Ukraine leading to sanctions on financial institutions, to the Danske Bank scandal culminating in the Danish arm pleading guilty to fraud. We pick 5 events that we think you should know about and why.

The invasion of Ukraine: sanctions in the spotlight 

Following the Russian invasion of Ukraine in February 2022, major jurisdictions including the U.S. and the E.U. took unprecedented measures to increase the financial pressure on Russia. 

In a short space of time, financial institutions were required to put in place a growing list of sanctions, targeting a range of actors from individuals to banks and state institutions. 

However, announcing sanctions is one thing, ensuring that banks are putting them in place effectively is another challenge altogether. There are multiple instances where banks have failed to properly implement sanctions in the past, allowing the assets and transactions of both individuals and businesses to slip through the net. 

As a result, the technical and policy challenges of sanctions implementation were high on the agenda of the financial crime community. In particular, the need to combine a comprehensive approach to data analysis with a fast response placed significant strains on the teams within financial institutions charged with ensuring effective implementation. 

Cybercurrencies: Losing their shine? 

In the first quarter of 2022, market prices for cryptocurrencies were reaching record highs. Despite words of caution from some Central Banks, multiple sources including major consultancies were talking up the massive potential of crypto as an investment for financial institutions and retail investors alike. 

By December, the prices of major cryptocurrencies including Bitcoin had fallen by 60% or more. Crypto platform FTX had collapsed among allegations of fraud, and other platforms were facing hundreds of millions in fines for money laundering failings. 

While crypto continues to be a relevant factor from a financial crime risk management perspective, following these developments financial institutions are taking a more cautious approach and will likely continue to do so throughout 2023. 

Danske Bank plea agreement: a financial crime risk masterclass 

In December, the multi-year saga of the Danske bank money laundering scandal reached another milestone. The Danish bank’s plea agreement with U.S. authorities contains multiple lessons for financial institutions, including correspondent banks, on how (not) to manage financial crime risk, summarized in our recent article - you can read it by clicking the link below.

What the Dankse Bank scandal can teach us about financial crime risk management
Click to read the full analysis of the Danske Bank scandal of December 2022

Cross-border payments: faster and cheaper…but what about risk? 

The G20’s multi-year program to make cross-border payments faster, cheaper and more secure continued to drive the international agenda, as evidenced by progress reports by major institutions including the Financial Stability Board. 

Central Banks are working together to test the use of Central Bank Digital Currencies (CBDCs) to transact across borders. And in the EU, the European Commission published a proposal for affordable, secure payments in euros to be carried out in less than 10 seconds across the bloc.  

In coming years, all of these developments will have impacts on financial crime risk management. As end-users grow to expect fast and secure international transfers as the norm, it will become more critical than ever to ensure data-driven, automated analytics are in place to manage risk. 

A step back for beneficial ownership transparency in the EU 

Since major media stories such as the Panama Papers, awareness of the need to tackle the abuses of anonymous company ownership has continued to grow in the financial sector. One of the key tools for this purpose are publicly available registers of the beneficial owners of companies, which can be used for risk management and investigations, among others. 

In October, the Court of Justice of the European Union (CJEU) declared a provision of the 5th EU Anti-Money Laundering Directive that guaranteed public access to information on beneficial ownership to be invalid. While this setback is not definitive, as similar cases are still pending, it has an immediate impact on the daily working practices of investigators and practitioners around the world. 

Ready for data-driven financial crime risk management? Read our correspondent banking guide to adopt technology and reduce your financial crime risk.

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