Technology and global ties: turning the tide on financial crime

Speaker: Christopher Woolard, Executive Director of Strategy and Competition
Location: Anti-Money Laundering TechSprint, London
Delivered on: 24 May 2018

Highlights:

• The financial system is the gateway through which criminals must pass to make crime pay.
• New technologies have huge potential to monitor, analyse and prevent financial crime.
• A clean, competitive financial system cannot be achieved in isolation – only by working together can we make a real impact.

Note: this is the speech as drafted and may differ from the delivered version.

The past few days have seen technical experts apply their talents to the task of developing prototype solutions to combat money laundering and financial crime.

Our focus today is to bring together industry figures, technology specialists and global regulators to discuss how we can take this forward, working together to tackle some of the biggest, and most egregious, issues facing the financial sector.

This is the fifth TechSprint we’ve held, with others looking at topics as diverse as mental health, regulatory reporting and access to financial services. The scale of the issue we’re tackling today makes this TechSprint perhaps our most ambitious yet, with 400 of you here from around 100 organisations. But no one would deny that it’s a challenge worthy of our attention.

I don’t need to tell the people in this room that financial crime is big business, and a huge burden on firms, who are on the frontline in the fight to keep markets clean. 

As my colleague Megan Butler said in her speech earlier in the week[1], trade bodies estimate British banks spend £5bn annually combating financial crime – that's £1bn more than Britain spends on prisons.

The FCA’s own financial crime survey, in which firms submitted a year’s worth of data, showed that employees at all levels raised over 920,000 internal suspicious activity reports to their money laundering reporting officers. Meanwhile, more than 1.1m prospective customers were refused services amid financial crime concerns.

But this isn’t just a compliance issue, it’s a human one.

It is estimated that $150bn is made from forced labour every year, that’s over $4,750 a second.

The drug trade, and the professional brutality that sustains it, is valued at $320bn annually.

And the National Crime Agency estimates up to £90 billion is laundered in the UK alone[2].

Whether it’s funnelling the proceeds of their trade, stealing victims’ identities to open bank accounts or funding atrocities committed on our streets, the financial system is the gateway through which criminals must pass to make crime pay.

Those links to our financial system are both a strength and a weakness. Our challenge, and the reason we’re here today, is to monitor entry, devise controls and erect barriers powerful enough to stop bad actors in their tracks.

The task is daunting. New technologies have given criminals sophisticated tools to bend the financial system to their own ends, the anonymity granted by virtual currencies[3] being one well-known example.

But these same technologies, when used for good, could also be game changers in the fight against financial crime. 

Machine learning[4] to improve the detection of suspicious activity, Artificial intelligence driven anti-impersonation checks and distributed ledger technology[5] to improve the traceability of transactions are just some of the real, practicable solutions technology has gifted us.

These benefits of such advances are obvious. Not only in reducing the social cost of financial crime but in reducing the burden on firms of detecting it. 

From Australia to America, Singapore to Spain, financial crime stretches like a chain around the globe, blighting the lives of ordinary people as it goes. 

A network to beat a network

It is only by working together, pooling our resources and sharing our expertise, that we will achieve the real and tangible change we’re all seeking.

The truth is that without a harmonised approach, there can be no control.

If we’re truly going to cut the Gordian knot that is financial crime, we – both regulators and industry – have to collaborate. 

The potential when we collaborate is enormous.

Earlier this year we fired the starting gun on the world’s first global sandbox. This will allow firms to test innovative products and services across different jurisdictions, facilitating their ability to operate internationally. It will also allow international regulators to jointly identify and solve common cross-border regulatory problems.

This continues a tradition of collaboration that has long formed a key tenet of the FCA’s work.

In the last few years alone, we have signed 10 co-operation agreements[6] with 8 different jurisdictions. These agreements allow us to efficiently share market trends, work closely on projects, and drive cross border business in a sensible and measured way.

The global sandbox takes this one step further – offering us a powerful, practical way of improving outcomes for consumers by making it easier for firms large and small to get new products to market.

The global sandbox could also be the vehicle that helps develop the tools and technology we need to take on financial crime.  

In fact, our hope is that some of the solutions developed over the past few days will be candidates for the global sandbox, facilitating their development and active application in the marketplace.

Conclusion 

Financial crime, the perpetrators behind it and the victims of it can be found all around the world.

Which is why it will take a network to defeat this network.

In the fight against financial crime, fragmentation is our greatest enemy. 

The software developers, data scientists and infrastructure engineers who have been working on prototype solutions this week, alongside the plethora of international partners who will share their observations and insights today, are testament to the collective will we have to stem the tide of financial crime. 

That is why we hope that this TechSprint will start a chain reaction of other similar events held by partners across the globe. Meanwhile, Level39, London’s largest technology accelerator, will support each of the winning teams who’ve participated this week, to help their concepts become concrete solutions. My colleague, Mark Steward, will also chair a meeting of global regulators and law enforcement officials tomorrow to reflect on what we learn today.

I spoke earlier about money laundering being the way that makes crime pay.

Through our joint efforts today, and our ongoing collaboration from tomorrow, I believe we can begin to make financial crime a poor man’s game.
And in doing so protect innumerable people in the process.

Thank you all for being here. Enjoy your day. Let’s make it count.