High-level financial crimes represent a serious threat to the economic stability and integrity of markets and organisations worldwide. From money laundering to terrorist financing, these illicit activities can be so covert that they often go unnoticed.
Reporting such crimes is not just a regulatory requirement but a moral imperative to maintain trust and order in financial systems worldwide.
This article explores the process of recognising and reporting high-level financial crimes, providing individuals and institutions with the knowledge they need to act decisively.
What Are High-Level Financial Crimes
High-level financial crimes are often designed to defraud financial institutions, organisations, or governments. These complicated crimes are marked by deception, concealment, or breach of confidence and usually don’t involve physical force or violence.
Some examples of high-level crimes include:
- Corporate Fraud: Corporate fraud involves illicit actions taken by businesses or by individuals within their roles as company representatives. These actions, which are often unethical and deceptive, can range from manipulating financial statements to engaging in insider dealings or obstructing justice.
- Corruption: Corruption is the unethical conduct by individuals in positions of authority across both public and private sectors. It refers to actions where such persons exploit their roles for personal gain or to advantage others improperly. Examples of corruption include bribery, embezzlement, nepotism, etc.
- Money Laundering: The procedure involves disguising the origins of substantial sums of money obtained from illicit activities, like drug trafficking or terrorist funding, to make it seem as though they derive from legitimate sources. It is an organised crime by criminal enterprises looking to use or save proceeds without drawing attention to their illicit origins.
- Cybercrime: This is a rapidly growing area of criminal activity that functions via digital technologies. Cybercrime in the financial sector often includes hacking to gain unauthorised access to financial systems, phishing schemes for acquiring sensitive financial information and using malware to disrupt financial operations with the goal of financial gain.
- Terrorist financing: Terrorist financing is the practice of providing funds or financial support to terrorists or terrorist organisations. It is used to facilitate their operations, including planning, preparing, and executing terrorist acts. This funding can come from a variety of legal and illegal sources, including state sponsors, charitable organisations, and criminal activities.
Each type of high-level financial crime comes with its own set of challenges for detection, reporting, and enforcement. The complexity and sophistication of these crimes require robust AML and portfolio monitoring systems and vigilant oversight by financial crime professionals, regulatory bodies, and law enforcement agencies.
Also read: What are the Top 5 Financial Crime Threats in 2024?
The Process of Reporting a High-Level Financial Crime
Reporting high-level financial crimes is a structured process that involves multiple levels of accountability and assessment. Being the first line of defence, financial institutions typically need to play the crucial role of detecting and reporting such crimes. To recognise suspicious activities such as money laundering, fraud, or other economic crimes, they are obligated by regulations to have adequate systems in place.
Institutions must always remain vigilant by conducting thorough investigations into suspicious activities, ensuring a comprehensive risk assessment is carried out if a prospective client is suspected of having a questionable financial track record. It’s imperative that these findings are then reported with due diligence to the appropriate regulatory body tasked with overseeing such crimes within their jurisdiction, following the specific suspicious activity reports (SARs) framework.
Who Investigates High-Level Financial Crimes?
Different countries have designated organisations responsible for tackling financial crimes.
For example, in the United States, economic crimes are investigated by the United States Department of the Treasury Financial Crimes Enforcement Network (FinCEN). Securities fraud related crimes are investigated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
These organisations often collaborate with the Federal Bureau of Investigation (FBI) to investigate and prosecute crimes related to the financial sector, including but not limited to securities fraud, insider trading, and accounting fraud.
In the United Kingdom, the response to economic crime is coordinated by the National Economic Crime Centre (NECC), a part of the National Crime Agency (NCA). The NECC works across various agencies, including law enforcement, national departments, regulatory bodies, and the private sector.
There are also other organisations like the Serious Fraud Office (SFO), the UK Financial Intelligence Unit (UKFIU) and the Financial Conduct Authority (FCA) to address and reduce various types of financial crimes.
Each country has its own regulatory framework and investigative bodies to address the complex nature of high-level financial crimes, with many also cooperating on an international level to tackle crimes that cross borders, such as the INTERPOL’s Financial Crime and Anti-Corruption Centre (IFCACC).
Steps to Report a High-Level Financial Crime
Reporting a high-level financial crime involves a number of deliberate and strategic actions, which usually vary significantly based on country and jurisdiction.
Firstly, financial institutions should have appropriate systems in place to detect any suspicious activities. Once detected, it should be evaluated to determine if it differs from expected behaviour based on the client’s profile or established financial patterns.
The next step is to gather and compile extensive documentation related to the transactions and behaviours in question. This includes collecting relevant records, statements, communication logs, identification information, and any other details that may be applicable to understanding the full scope of the suspicious activity.
After this, an internal investigation should be conducted to establish the context and potential risk associated with the suspicious activity. After that, findings should be presented to compliance officers or others responsible for overseeing adherence to AML and financial crime regulations.t
If the internal investigation concludes that the suspicious activity warrants additional scrutiny from law enforcement, a Suspicious Activity Report (SAR) should be submitted with all requisite details of the transactions and behaviours in question. This SAR is then filed with the appropriate national authority or agency that investigates financial crimes. It should include all relevant information that the agency would need to analyse the suspicious activity further.
After submitting the SAR, the financial institution should respond promptly to any follow-up inquiries or requests made by investigative authorities. This can include providing additional documentation, answering questions, or assisting with further investigation.
Throughout the process, be sure to preserve all the information related to reports and investigations confidentially.
The Importance of Compliance and AML Programs to Prevent Financial Crime
A robust compliance framework coupled with an effective Anti-Money Laundering (AML) program is essential for the early detection and prevention of financial crime risk within any financial institution. Enforcing comprehensive money laundering regulations and strategies helps institutions recognise and mitigate the threats associated with money laundering and other financial offences. It is by only doing thorough due diligence on clients that financial institutions can understand if any factors could indicate potential fraud, money laundering or other financial crimes
Regular risk assessments are equally important, enabling institutions to stay ahead of emerging threats and to adapt their defence mechanisms accordingly. Moreover, these programs are not static. They require constant evaluation and updating to respond to the evolving tactics of financial criminals, especially in an age where cybercrime is on the rise.
The strength of a financial institution’s compliance and AML efforts is a reflection of its commitment to maintaining a clean, secure, and trustworthy financial environment. With criminals becoming more innovative and with new technological advances emerging year by year, financial compliance and AML programs must be equally dynamic, leveraging the latest in technology and intelligence to identify these threats.
How Mercore Compliance Compliance can help?
At Mercore Compliance Compliance, we professionally consult financial institutions, organisations and governments with compliance standards to prevent fraud and other economic crimes.
Utilising advanced technology and best practices, we provide services tailored to unique needs, including financial crime compliance consulting, AML monitoring, and risk management.
Our team of financial crime and risk management experts will ensure that you fulfil your regulatory obligations to safeguard your finances effectively, allowing you to focus on your core business and commercial activities.
Contact us today for a professional consultation by filling out the form below.
FAQs
An SAR is a report made by an individual or an organisation about a transaction or activity that seems unusual or suspicious. It is submitted to the authorities to alert them of possible financial crime.
A SAR should be filed when a suspicion of financial crime arises. It is important to report suspicious activity promptly to help in the restraint of criminal activities and protect the financial system.
An MLRO is responsible for making sure that an organisation adheres to anti-money laundering regulations. They oversee the submission of SARs and provide guidance on suspicions of financial crime.
Yes, you can submit a SAR anonymously if you have worries about your identity being revealed. However, providing contact information can be helpful for additional follow-up if needed.
If you believe someone is involved in an economic crime, you should make a suspicious activity report to the particular governing body that works with such crimes. You may need to submit evidence that supports your claim.
