The Financial War on Crime and Terrorism

Inhaltsverzeichnis

1. Frontmatter

2. Financial Crime Prevention in an Age of Paradox

   Jamie Ferrill, Louis de Koker, Doron Goldbarsht

   Abstract

   Financial crimes such as fraud, corruption, and proceeds of crime are embedded in societies globally. These crimes—from money laundering to terrorist financing, sanctions evasion to proliferation financing, corruption to kleptocracy, fraud to tax evasion, and everything in between—manifests in various forms. While the implications of these financial crimes may vary across borders, one thing is true: we—our states, institutors, and indeed ourselves as individuals—are all vulnerable in some way to financial crime abuse.

3. Leadership in the Evolving Landscape of Financial Crime: Navigating AML/CTF Risks and Controls

   Jamie Ferrill, Rachel Southworth

   Abstract

   The global Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) control landscape is characterised by continuous evolution, driven by diverse and shifting regulatory frameworks, societal expectations, emerging threats, and interpretations of risk. This chapter investigates the critical role of leadership in navigating this complex environment in an institutional setting, offering theoretical insights and practical outcomes for improving financial crime risk assessment and strategic response.

   Drawing on contemporary leadership scholarship and practice, the chapter explores how leadership can influence financial crime risk management practices, specifically in maintaining effective AML/CTF compliance programs. The authors present the need for a measure of “effectiveness” and propose a model to illustrate the tangible benefits of strategic leadership for financial crime prevention, including the implementation of risk assessment frameworks that enhance compliance capabilities.

   The chapter further explores the influence of organisational culture, arguing that a culture aligned with adaptive and ethical principles is essential for effective AML/CTF risk management initiatives. It highlights how leaders can cultivate such a culture to meet evolving regulatory demands and societal pressures. Additionally, the analysis offers practical guidance on fostering environments that are receptive to innovation as well as proactive regulatory compliance.

   To ground these insights in real-world challenges, the chapter examines a high-profile case, offering a critical analysis of leadership and cultural missteps that resulted in regulatory breaches, organisational fallout, and an increased risk of financial crime. This case study serves as a cautionary tale, providing lessons on what can go wrong and how ineffectiveness leading to such failures can be mitigated through improved leadership and cultural strategies.

   Ultimately, this chapter bridges academic literature with practical implications, proposing a framework for leaders and policymakers to enhance financial crime control and prevention efforts. It calls for a rethinking of traditional leadership models and a greater emphasis on the application of adaptive, culturally aware strategies to keep pace with the evolving AML/CTF risk and control landscape.

4. FATF and the Conundrum of Public-Private Sector Intelligence and Information Sharing

   Paula Chadderton

   Abstract

   Concerns at the international, regional, and national levels about the increasing sophistication of financial crime and the strategies transnational organised crime groups use to launder money have led to increased interest in exploring innovative initiatives that optimise available information and resources. Public-private sector information sharing initiatives have been seen as a useful mechanism for optimising resources, garnering new insights on financial information and intelligence and improving reporting on financial crimes and transnational organised crime activities. However, a tension exists between the international community’s encouragement of greater public-private sector information and intelligence sharing on financial crime issues, and the extent to which international instruments (including the Financial Action Task Force (FATF) Standards) actually support that sharing. This tension has caused some commentators to doubt the effectiveness of anti-money laundering, counter-terrorism financing, and counter-proliferation financing (AML/CTF/CPF) frameworks in enabling public and private sector entities to identify, mitigate, and prevent their financial crime risks.

   In its current form, the FATF Standards’ focus is on providing financial intelligence units and law enforcement agencies with the information they need to identify, investigate, and prosecute financial crimes. This focus, however, effectively discounts the private sector’s role need for information and intelligence from diverse sources to fruitfully contribute to AML/CTF/CPF efforts.

   The increasing complexity of the evolving criminal environment warrants that the FATF reconsider its position and provide a clear, demonstrable basis for public-private sector information sharing. Moreover, the FATF must also consider granting the private sector a more active position in FATF activities. Implementing these reforms would not only recognise the importance of public-private sector collaboration in combatting financial crime, they would also offer the prospect of optimising the financial intelligence and information holdings of both the public and private sectors to the benefit of those sectors and the broader community.

5. Private to Private: The Next Frontier of Financial Intelligence Sharing

   Doron Goldbarsht, Timothy Goodrick

   Abstract

   Efforts to counter financial crime have increasingly relied on Public-Private Partnerships (PPPs) to facilitate intelligence sharing between law enforcement and the financial sector. While these arrangements have improved coordination and contributed to the disruption of illicit financial activity, they remain limited by their dependence on public-sector initiation and oversight. This chapter argues that Private-to-Private (P2P) information sharing represents a necessary next step in the evolution of financial crime prevention frameworks. Drawing on global regulatory developments and practical case studies, the chapter explores the potential for P2P mechanisms to close existing intelligence gaps, enabling earlier detection and disruption of criminal networks. It critically evaluates two dominant models of P2P information exchange, highlighting the legal, technical, and governance challenges they present. Ultimately, the chapter calls for the development of trust-based, accountable systems of intra-sector collaboration, capable of enhancing the effectiveness and efficiency of global anti-money laundering and counter-terrorism financing regimes.

6. Network Analytics and Generative Artificial Intelligence: A Hybrid Approach to Money Laundering Detection

   Milind Tiwari

   Abstract

   This chapter focuses on the potential integration of graph databases and generative artificial intelligence (GenAI), such as large language models (LLMs), for enhancement of anti-money laundering (AML) detection efforts. The explored methodology is primarily conceptual, outlining a framework for how these technological advancements could be combined, rather than detailing currently deployed systems. The methodology involves focusing on the growing role of LLMs in regulatory compliance and graph databases in uncovering money laundering schemes, thus paving the way for supporting an agile and proactive AML infrastructure. Graph databases facilitate investigators to identify hidden relationships within a network of illicit entities, exposing hidden relationships across entities. By leveraging the capabilities of GenAI, organisations could potentially map these complex relationships between entities in real-time and draw actionable insights. Moreover, such an integration would allow AML practitioners to visualise, interpret, and disrupt illicit networks with unprecedented precision. The integration, while offering enormous opportunity, underscores the importance of addressing challenges including data biases, ethical considerations, and the need for interdisciplinary collaboration to fully utilise capabilities of technological innovations in combatting financial crime.

7. Illegal Wildlife Trade as a Method of Financing Terrorism

   Cayle Lupton

   Abstract

   The economic, societal, and environmental harm associated with the illegal wildlife trade (IWT) is well-documented and uncontroversial. The same, however, is not true of the connection between IWT and terrorism, since early claims in point were supported by weak, unverifiable evidence. In recent times, however, several authoritative sources have referred to a limited use of IWT in the financing of terrorism. Despite these pronouncements, there remains a notable gap in the academic literature on the terrorism financing-IWT nexus. This chapter seeks to illustrate the potential of IWT to develop into a prolific terrorism financing method. The chapter concludes that to effectively address the terrorism financing-IWT nexus and terrorism in general, an integrated approach, involving multiple stakeholders, is essential.

8. Practice to Deceive: A Taxonomy of Money Laundering Deception Based on US and Australian Case Studies

   Ben Scott

   Abstract

   The practice of deception is integral to financial crime in many of its forms. The criminal offence of money laundering involves knowingly conducting transactions, movements of funds or dealings in property that are derived from criminal activity. Concealing or disguising the criminal origins of crime-derived wealth is one of the acts which distinguishes money laundering from simply spending the proceeds of crime. Despite the centrality of deception to money laundering, there has been limited research into how money laundering deception operates and the forms it takes. The established three-stage conceptual model of the money laundering cycle provides a useful framework for understanding certain kinds of laundering activity. However, it does not support the granular analysis of deception practice which this chapter argues is fundamental to developing effective anti-money laundering control environments within advanced economies.

   The chapter aims to develop deception as a lens through which to facilitate applied research into the detection and prevention of money laundering by combining legal analysis with financial intelligence case studies. It draws on frameworks developed within cybersecurity and intelligence to support a deeper analysis of deception practice in money laundering. The chapter begins with a review of the element of deception in the criminal law of money laundering, focusing on the common law jurisdictions of Australia and the United States. The chapter then applies a taxonomy of deception developed by cybersecurity researchers Rothstein and Rowe to two case studies of complex money laundering: the Toronto Dominion Bank and Changjiang Financial cases. The chapter posits a distinction between primary deception, which focuses on concealing the criminal origin of transactions, funds and assets through various means, and secondary deception, which involves plausible denial of criminal knowledge, usually by third-party facilitators.

9. Geopolitics of State Capture: Systemic Corruption as a Professional Service

   • Open Access

   Nicholas Donaldson, Christian Leuprecht

   Dieses Kapitel befasst sich mit der Geopolitik staatlicher Vereinnahmung, einem systemischen Korruptionsphänomen, das sich in die globalen Kapitalmärkte eingebettet hat. Darin wird untersucht, wie Eliten staatliche Institutionen instrumentalisieren, um Renten zu erzielen und Erlöse durch transnationale professionelle Förderer, insbesondere Finanzinstitute, zu waschen. Das Kapitel untersucht auch, wie staatliche Vereinnahmung eigennützige Korruption transzendiert, wobei Länder wie China und Russland sie als Werkzeug für hybride Kriegsführung und Taktiken in der Grauzone einsetzen. Der Text bietet einen Proof-of-Concept für einen theoretisch motivierten komparativen Ansatz zur Vereinnahmung von Staaten und stützt sich dabei auf Fallstudien des osteuropäischen Waschsalons und der Zuma-Administration in Südafrika. Sie konzeptualisiert auch das Versagen von Rechts- und Regulierungssystemen durch eine globale Objektivlinse zur Erfassung des Staates und erweitert die im Entstehen begriffene Forschung über staatliche Erfassung als politische Modalität. Das Kapitel kommt zu dem Schluss, dass die Vereinnahmung von Staaten nicht nur ein Ergebnis ist, sondern eine dynamische und strategische Regierungsform mit erheblichen geopolitischen Auswirkungen.

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10. Corrupt Elites and Godfathers in Nigeria: Structural Impunity and the Undermining of Accountability

    Jackie H. Harvey, Petrus C. van Duyne

    Abstract

    Corruption would appear to be almost ‘hardwired’ into the fragile democracy of Nigeria. Well-endowed with natural resources, Nigeria should have been one of the wealthiest countries in West Africa. Instead, it has one of the highest levels of inequality with a large part of the population living below the poverty line in contrast to a small elite that has reserved access to the national wealth. Based on a review of literature on the subject that is supported by documentary analysis of media sources and of known cases, our chapter seeks to understand the social historical context of corruption of the ruling elite.

    Within many countries there is an inevitable tension between the ideals of equality across the wider population and the favourable position of a far smaller group of political elitist entrepreneurs. A small part of it manifest itself as ‘godfathers’, wealthy political patrons, who form the political elite class. Of interest is the position of this godfatherism in Nigerian society, whether that be within the political or economic sectors, and how they are able to influence decisions of social and economic importance by influencing the instalment into high positions of their nominees (godsons). But the godson remains dependent as he must pay back the investment. This can lead to rigged election outcomes and processes. When elitism becomes corrupted in this manner, we find that established norms and traditional hierarchical deference to authority actually protect those politically powerful elitist entrepreneurs, which would place them ‘above the law’. This position will only change when there is far greater transparency within the decision-making process as currently the case.

11. Dangerous Play: AML/CTF/CPF Risks in the Gaming Sector

    Jeffrey Simser

    Abstract

    Money laundering is a foundational function for transnational organized crime, back office activity moving illicit profits to the right place without interdiction by law enforcement or criminal rivals. Gaming is popular around the world, functioning in regulated, under-regulated and unregulated markets. The chapter explores the exploitation of gaming systems by money launderers, hiding illicit financial flows in the larger stream of gaming revenue.

    The chapter begins with a discussion of money laundering, gaming and the regulatory systems used to manage risk. The Canadian system is offered as an example. The chapter then explores money laundering typologies that have pierced the regulatory systems governing land-based casinos in Canada, the United States and Australia. Typologies that can penetrate the regulated online gaming system in Europe are then considered.

    The chapter then moves to the massive gaming grey market, where gaming is either unregulated or under-regulated. Junkets and an intense demand to evade Chinese restrictions on gaming and capital flight have created a perfect storm, opening up a massive informal value transfer system that has spread from Southeast Asia into all corners of the world. The resultant underground banking network has matched professional money launderers with transnational organized crime worldwide, including Central American drug cartels and European organized crime.

    The chapter briefly notes the challenges posed by match-fixing and corruption in sport. The links between gaming, cryptocurrency and terrorism/proliferation financing are considered. Finally, the chapter concludes with three examples that show the linkages between gaming, transnational organized crime and money laundering. The chapter concludes by observing that while there is ample literature discussing money laundering and research into gaming, more work needs to be done on the linkages between the two activities.

12. International Arbitration and Money Laundering: Is There an Actual Issue?

    Robert Walters

    Abstract

    International commercial arbitration (ICA) has long been considered an effective tool to resolve cross border trade and investment disputes. However, with technology and the potential for arbitrators to be exposed to, and placed in complex situations where, for instance, resolving financial transactions disputes that for part of an arbitral procedure could directly or indirectly be associated with Money Laundering (ML).

    ICA is a non-judicial mechanism for public and private disputes, where the parties agree (Redfern and Hunter, Law and practice of international commercial arbitration. Oxford University Press, 1986, p 23), through either a contract and/or arbitration agreement to resolve disputes. While arbitration is voluntary, the process itself provides a high level of confidentiality to the parties. It keeps the dispute out of the courts. One of the fundamental features of international arbitration is confidentiality. This well understood principle could be in conflict with ML activities that arise from arbitral proceedings. This chapter will compare the arbitral laws of the United National Commission on International Trade Law, and the national laws of Australia, India, United Kingdom, United States, European Union, and selected Arbitration Institutions from these economies, to confirm or otherwise whether they adequately address ML activities. The chapter will confirm or otherwise as to whether there is a need for the laws, standards and rules used by arbitrators in arbitral proceedings are in need of updating.

    Notwithstanding this, the above is based on the fact that from time to time, there could be contracts that parties have agreed upon, prior to a dispute, raise complex issues related to burden of proof, evidentiary requirements, applicable criminal laws, enforcement, and judicial review (Born, International commercial arbitration, vol I–III, 2nd edn. Kluwer Law International, 2014). The question arises, what are the obligations of an arbitrator under the rules of confidentiality and impartiality to the arbitral process, when having to deal with issues of ML? This chapter will look at whether there have been technology breakthroughs such as blockchain that could assist in managing these issues. It will look at the international and national definition of ML and contracts the definition/s with the arbitral rules and standards.

    Significantly, this chapter will address the rules of evidence as they pertain to the well founded and generally applied rules of the balance of probabilities for arbitration proceeding, versus the principle of beyond reasonable doubt for criminal offences such as ML. This alone will be complex to reconcile as arbitrators begin to use and apply technology to an arbitral proceeding. The technology itself may be able to mask or hide such activities; therefore an arbitrator will require new skills so as to ensure they are not compromised. That said, it will be argued how overcoming confidentiality in arbitration will be problematic, when compared to the current day laws and selected arbitration institutional rules. In concluding this chapter, the arbitrator will need to reconcile how they deal with a detection of ML, and how they manage the issue and/or whether there is an obligation to report the alleged criminal activity. This will need to be finely balanced between an arbitrator’s obligation to confidentiality, and the implementation of relevant rules and arbitration laws.

13. The Impact of the Financial Action Task Force (FATF) Standards and Focus: From Effectiveness to Effect

    Nicholas Morris, Louis de Koker

    Abstract

    The Financial Action Task Force (FATF) is the global intergovernmental standard-setting body for anti-money laundering and the combating of terrorist and proliferation financing (AML/CFT/CPF). More than 200 jurisdictions globally are committed to complying with its standards. They are subject to peer-based evaluation of the quality of their compliance and to black- and grey-listing, with accompanying negative economic impact, when their systems are found wanting. This has placed considerable burden on smaller, less-developed, countries. The FATF reformed its greylisting processes in 2024 to provide some protection for smaller economies in the fifth round of mutual evaluations, with increased focus on larger economies.

    This chapter considers the time and attention that the FATF has focused to date on smaller economies compared to larger economies and whether there is evidence of positive crime-combating and governance benefits resulting from the attention. Applying a FATF Activity Score, it finds that the FATF has focused extensively on lower-middle income countries while devoting the least time to the rich countries that generally hold and process the largest share of global illicit funds. The chapter also considers whether there are correlations between the FATF’s activity and focus and higher governance and crime-combating levels in a country. The study finds little correlation between FATF-related activities aimed at raising country compliance levels, the country’s FATF effectiveness scores, and positive governance and crime prevention outcomes of the country. The FATF activity and pressure to date has resulted mostly in higher levels of technical compliance with the FATF standards. This is out of proportion with other key indicators and development factors for smaller economies, resulting in a ‘rhino horn’ effect in spider diagrams of key indicators, with high technical compliance levels that are not proportionately reflected by achievements in the related indicators.

    The lack of impact may be due to incorrect assumptions that compliance with the FATF standards would lead to such positive outcomes. Poor implementation of laws and structures could, however, explain in part the lack of clear correlation with positive governance and crime prevention outcomes. Unfortunately, effective implementation may not improve for low-income countries during the new round of mutual evaluations. Lack of resources and capacity is often a key constraint in these economies and this is unlikely to change. A greater focus on effective implementation of the FATF standards by richer economies in FATF’s fifth round of mutual evaluations commencing in 2025 may in fact deliver better overall governance and crime prevention outcomes. Political will is, however, a key constraint in these economies, and this constraint may become more challenging in the current period of geopolitical fragmentation and repositioning.

14. The Financial War on Crime and Terrorism—Important Research Questions

    Louis de Koker, Doron Goldbarsht, Jamie Ferrill

    Abstract

    The fight against financial crime is often framed in military terms, with compliance officers and law enforcement professionals portrayed as soldiers engaged in battles within a broader war on crime. This collection has examined several facets of that struggle, including the fundamental question of whether the war is, in fact, being won. Yet, in an era of growing geopolitical fragmentation and the increasing deployment of sanctions against nation-states, the boundaries between military conflict and financial crime are becoming increasingly blurred. The overarching strategy—and progress toward it—remains uncertain. Despite significant investment and mounting regulatory pressure, it is still difficult to determine whether current approaches are effectively disrupting criminal activity or merely enhancing compliance metrics. This chapter explores key research questions that emerge from this evolving and complex landscape.

15. Correction to: Geopolitics of State Capture: Systemic Corruption as a Professional Service

    • Open Access

    Nicholas Donaldson, Christian Leuprecht

    Dieses Kapitel vertieft sich in die Geopolitik staatlicher Vereinnahmung und konzentriert sich auf systemische Korruption als professionelle Dienstleistung. Es präsentiert korrigierte Venn-Diagramme, die die sich überschneidenden Rollen und Aktivitäten von Unternehmens- und Rechtsdienstleistern, Finanzinstituten und PR-Firmen veranschaulichen. Diese Diagramme beleuchten gemeinsame Praktiken wie aggressive Steuervermeidung, Geldwäsche, Rufwäsche und politische Lobbyarbeit sowie strategische Philanthropie und Maklertätigkeit. Das Kapitel enthält auch ein Balken- und Liniendiagramm mit FCPA-Durchsetzungsdaten von 1977 bis 2024, das Schwankungen und bemerkenswerte Spitzenwerte bei Durchsetzungsmaßnahmen unter Beteiligung von Vermittlern aufzeigt. Zusätzlich werden in einem Säulendiagramm die FCPA-Durchsetzungsmaßnahmen nach der Art der beteiligten Vermittler aufgeschlüsselt, was die Vorherrschaft der Maßnahmen unter Beteiligung von Agenten, Beratern und Maklern betont. Das Kapitel schließt mit einer umfassenden Analyse der Daten, die Einblicke in die Muster und die Verbreitung von Korruption in verschiedenen Sektoren bietet.

    KI-Generiert

    Diese Zusammenfassung des Fachinhalts wurde mit Hilfe von KI generiert.

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