Detecting financial crime and money laundering: how are we fighting it?

What is ‘financial-economic crime’?

Experts estimate that around 2,400 billion euros circulate in criminal transactions worldwide each year. The money often originates from illegal activities such as drug trafficking, terrorism, human trafficking, and illegal wildlife trade.

What is money laundering?

An example: a criminal has earned a million euros in cash from drug trafficking – a huge amount of money that will be noticeable. He would rather not have anyone discover where he got all that money, so he carries out numerous money transactions to conceal the origin of the money: he tries to launder his money. Of course, he could spend a little bit of that money every day to do his groceries at the supermarket. But that type of laundering would take years. It’s quicker if he pays for his dream house in cash with 50 and 100 euro notes. But would he find any seller willing to accept a huge pile of cash? It’s more likely that they would report it to the police.

If a criminal wants to live off his criminal money, he must try to bring it into the legal system one way or another, so no one will find out where he got it.

Where does the term ‘money laundering’ actually come from?

The term “money laundering” is literally derived from laundering clothes. In the 1920s, America was ‘dry’: it was forbidden to produce and trade alcohol. The American mafia boss Al Capone tried to legalise his profits from illegal alcohol sales by buying up several laundromats. Clients paid with coins to start the machines. That meant cash entered the business in a legal manner and enforcement agencies found it difficult to determine exactly how much money was coming in through the machines. Al Capone’s laundromats – supposedly – made huge profits, but in fact, the profits came from his illegal alcohol trade.

How do criminals manage to launder money nowadays?

In some cases, criminals , such as fraud or corruption, criminals receive their proceeds directly through the banking payment system. However, in most cases a criminal will receive their proceeds in large quantities of cash, which he may bring to a country where supervision and control are less stringent and deposit it into a bank account there. He can also exchange the money into other denominations or currencies and deposit it in smaller amounts. He can then spread the money across multiple bank accounts and countries. That way, no one can see where the money originated. Eventually, the criminal tries to make the money legal by investing in legitimate business or real estate.

How does ABN AMRO detect criminal transactions?

Banks in the Netherlands process 6.6 billion transactions each year. Only a small part consists of criminal transactions. ABN AMRO does everything possible to find those transactions. We want to protect clients and we don’t want to help criminals. That’s our ‘gatekeeper role’. Over 3,800 employees at ABN AMRO are involved in detecting unusual transactions (‘transaction monitoring’) and assessing new and existing clients (‘client due diligence’).

Collaborating for safety

If ABN AMRO refuses a client or parts ways with a client, they can knock on any other bank’s door. That bank will go through a screening procedure, and perhaps the client will slip through. That’s why we are exploring how we can collaborate more effectively for a safer world with other major banks, the Public Prosecution Service, the police, the FIU, FIOD, and the Dutch central bank (DNB).

What legislation do we have for money laundering and terrorist financing?

The Netherlands has the Money Laundering and Terrorist Financing (Prevention) Act (Wwft). DNB supervises banks and assesses whether they comply with the Wwft. The Wwft incorporates European money laundering regulations, which are based on international guidelines from important organisations such as the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision (BCBS).