SmartSearch inspected a total of 16,150 anti-money laundering (AML) events recorded between 2013 and 2023 - to determine which financial crimes and AML compliance issues are most prominent - and in which countries.
AML events include recorded crimes or issues relating to money laundering, drug trafficking, financial fraud, AML compliance failures, violations of AML laws, regulatory breaches, reporting failures, and international sanctions.
In its 2024 Money Laundering and Financial Crime Stats Report, SmartSearch found that across the world, drug trafficking (29.3%) was followed most notably by financial fraud (22.2%), money laundering (17.6%) and AML compliance failure (9.5%).
Officials from SmartSearch emphasise the need for businesses to implement robust AML processes and software to detect criminal behaviour. Without adequate measures, they risk hefty fines, jail time, and enabling illegal activities. AML compliance involves thorough checks, verifications, and continuous monitoring, including document verification, source of funds verification, sanctions list checks, and reporting of suspicious activities.
With the most data available for AML events in the US and UK, SmartSearch took a deep dive into the financial crimes and compliance issues recorded in these countries.
11,472 out of the 16,150 AML events analysed in 2014-2024 were recorded in the US. Similar to the global stats, drug trafficking comes in top (35.9%), followed by financial fraud (25.9%) and money laundering (15.7%).
SmartSearch’s team added that drug trafficking in the US is a complex problem influenced by law enforcement efforts, border control challenges, organised crime, global drug trade networks, corruption, ineffective drug policies, high demand, and more. According to the United States Sentencing Commission, of the 20,037 cases reported to them involving drugs in the fiscal year 2022, 19,851 involved drug trafficking specifically.
In the report, it is detailed that drug traffickers may be hiding their money by utilising shell companies, bulk cash smuggling, trade-based money laundering, cryptocurrencies, cash-intensive businesses like casinos, offshore accounts and tax havens, and through real estate transactions - all of which pose a wider threat to the US economy.
The US Department of Treasury's FinCEN aims to prevent illicit use of the financial system, combatting money laundering and related crimes, including terrorism. In December 2023, it announced plans to propose a rule targeting money laundering in real estate, expected in early 2024. This rule would require investment advisers to flag suspicious transactions and real estate professionals to report the identities of beneficial owners of companies purchasing real estate with cash.
In the UK, with a total of 1,664 AML events analysed, the top AML event in the 2014-2024 period was money laundering (27.5%). This was closely followed by AML compliance failures (23.9%) - which even beat drug trafficking (19.8%) and financial fraud (13.4%) to the top spot.
While just under a quarter of the UK’s AML events relate to compliance failures, this doesn’t include reporting failures (2.1%) and violations of AML laws (1.5%) - meaning the overall figure is slightly larger.
SmartSearch representatives expressed concern over the substantial occurrence of AML compliance failures in the UK, notably at 23.9%, despite advancements and reforms. They stress the importance for businesses to take proactive steps, including establishing dedicated AML compliance teams. These teams would ensure adherence to regulations through training, due diligence, risk assessments, and seeking professional advice.
In 2023, HMRC announced it fined 240 businesses a combined total of GBP 3.2 million for breaching AML rules. It said its work with other enforcement agencies and Government departments to tackle economic crime and crack down on breaches, is working to drive non-compliant firms out of business.
Businesses in both the UK and the US still rely on manual verification methods, which are not only time-consuming but also prone to errors, leaving room for exploitation by criminals using convincing fake documents. The recommendation is to adopt robust electronic verification methods that automate AML compliance processes and mitigate the risk of fraud.
In Late 2023, HM Treasury initiated a consultation on AML and counter-terrorism financing supervision reform, proposing four models to overhaul the existing regulatory framework. These models aim to consolidate supervision into fewer bodies, amidst concerns raised by various accounting bodies about potential weakening of the UK's fight against financial crime.
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