The European Union Agency for Law Enforcement Cooperation (Europol) recently released its first financial crime threat assessment. It reveals that a perfect storm of digitalization, geopolitical tensions caused by Russia’s invasion of Ukraine, plus the actions of organized crime, are helping to drive financial and economic crime to new heights.
The European Financial and Economic Crime Threat Assessment is compiled from “operational insights and strategic intelligence” contributed by member states and Europol partners. It describes a criminal economy worth billions of euros which impacts millions of people every year.
It also indicates that national authorities inside the EU are not adopting a consistent approach to investigating the money laundering typologies used by criminals to push dubious cashflow and assets through banks and other monetary systems.
To give it some background, the EU’s law enforcement agencies seized an average of €4.1 billion ($4.4 billion) per year between 2020 and 2021. Although double the figure seized in 2016, it still only equates to 2 percent of total criminal profits that Europol approximates run to €188 billion (in excess of $200 billion).
Technology is a key enabler of such crimes, through the use of encrypted messaging apps, dark web marketplaces, cryptocurrency, cybercrime-as-a-service models, ChatGPT for phishing, and deepfakes.
Legitimate fintech innovations such as virtual IBANs (International Bank Account Numbers), which help to mask suspicious transactions, and buy-now-pay-later (BNPL) financing, which is prone to account hijacking, can also hand an advantage to criminal communities, according to the assessment.
What’s needed to combat the problem? The assessment appears to recommend that a “standardized approach” should be adopted by and between the bloc’s various states – yet it remains unclear what is finally being proposed here.
This quote from the assessment itself is less than conclusive:
Parallel financial investigations is not a standard practice yet through EU law enforcement — even if this is a prerequisite for the recovery of more criminal assets and for better protecting citizens and the legal economy.
If the suggestion is that there is a need for financial investigators to conduct their inquiries in tandem with their law enforcement colleagues investigating the predicate crime, in anticipation of post-conviction confiscation/civil forfeiture of criminal assets, then I think this should be a baseline for all suitable cases. This is a standard practice in many countries, including in the UK.
The assessment also states:
Despite the strengthened legislative framework within the EU to address the threat posed by economic-financial crimes, financial investigations need to become a standard law enforcement practice when investigating serious and organized crimes. This will require substantial investment in resources and training.
I totally agree. Proper training in the investigation of financial crime is a prerequisite for success. Most detectives can use their skills to successfully investigate serious crimes such as robbery and murder. But investigating financial crimes such as money laundering requires additional training and often takes detectives away from their core background and experience, and outside of their professional comfort zone.
The new Europol assessment has other key findings:
- Almost 70 percent of criminal networks operating in the EU make use of money laundering to fund their activities and conceal their assets.
- More than 60 percent of these criminal networks use corrupt methods to achieve their illicit objectives.
- 80 percent of the criminal networks active in the EU misuse legal business structures for criminal activities.
- The criminal landscape is fragmented, with key players often located outside of the EU.
- The techniques and tools used by the criminals are advancing quickly, taking advantage of technological and geopolitical developments.
Given the almost borderless nature of the EU internally, the bloc is vulnerable to various forms of financial exploitation and manipulation. One of the underlying themes emerging from the assessment are problems with the exchange of law enforcement intelligence and information outside of the union, but more worryingly within the union too.
Although a standardized approach to investigations is an admirable objective, how can a small law enforcement team in Estonia or Luxembourg, for example, adopt the same investigative strategy as a large team in France or Germany? The disparity in resources and technical capability may well preclude any standardized approach to investigations unless it is seated at a lower level.
I do fully support the notion that each country should be required to conduct an absolute minimum of investigative work to ensure that nothing obvious is missed. By using this approach as a benchmark, if anything arises demanding additional resources, a smaller state should be able to seek support from its larger counterparts.
In summary, it is obvious that crooks will endeavor to attack where the EU is most vulnerable. The smaller states, with their less well-resourced law enforcement agencies, are the soft underbelly of the union. There needs to be further research by Europol to better identify how a well-intentioned and meaningful standardized approach towards money laundering investigations is going to be workable in the future, given the disparities in member states’ size and resources.