Cooperation between players will win the war on financial crimes

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Cooperation between players will win the war on financial crimes


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  • Financial institutions are the first line of defense in the fight against money laundering and terrorist financing, but beyond that there are other duty bearers who oversee and enforce the implementation of regulations. related.

Financial institutions are the first line of defense in the fight against money laundering and terrorist financing, but beyond that there are other duty bearers who oversee and enforce the implementation of regulations. related.

The Central Bank of Kenya fined five Tier 1 banks 392.5 million shillings in 2018, sparking a nationwide conversation about money laundering. Bank executives must have been surprised when the Director of Public Prosecutions also fined 395 million shillings after reaching a deferred prosecution agreement with them.

Obviously, the lenders weren’t out of the woods. It took serious negotiations and appeals for leniency to postpone their prosecutions and their leaders for violating anti-money laundering laws and regulations.

In January 2019, terrorists attacked the DusitD2 hotel in Nairobi and after investigation, a bank manager was charged in court with allegedly failing to disrupt financial transactions leading up to the raid.

In the fight against financial crime, it is important to recognize from the outset that there are three main actors: the criminal, the financial intermediary, state regulators and enforcement agencies. Financial intermediaries should ideally provide a secure channel for transacting, while the job of law enforcement agencies should be to apprehend perpetrators.

It must be clearly demonstrated that deliberate action to punish the real culprit goes beyond imposing heavy fines on financial intermediaries where the proceeds of crime are channeled. Financiers who are co-actors with regulators and enforcement agencies in the fight against financial crime remain the most exposed when the perpetrators go unpunished.

As a compliance practitioner, I see an imbalance of power between government agencies and private sector actors. This created a vertical power relationship instead of a horizontal collaborative approach. These days, criminals have the upper hand because they can collaborate while financial intermediaries are still working in silos.

I am referring to the NYS scandal, where it is reported that the same perpetrators funneled the funds through five different banks. If one of them had raised suspicions within an established framework of cooperation, then there would have been more chances of being quickly denounced by the suspicious nature of the transactions.

This would have minimized damage to banks and prohibited the theft of public funds. On the contrary, each of the institutions dealt with the situation independently and unfortunately the approach remains the same.

The reluctance to collaborate naturally is, as it comes with challenges, which may be business or political. Financial institutions that have invested heavily in their systems may be averse to such collaborations due to the risk of exposure associated with working with peers perceived to be weaker and seen as under-resourced.

Policy challenges include limitations brought about by laws and regulations. The recently enacted Data Protection Act 2019, which aims to regulate the processing of personal information, is a good example. Such a policy should ensure that criminals do not have a comparatively favorable position compared to duty bearers in the fight against financial crime.

One wonders if such collaborations exist and if they could thrive in the fight against financial crime?

In the United Kingdom (UK), the Joint Money Laundering Intelligence Taskforce (JMLIT) is a partnership between law enforcement and the financial sector to exchange and analyze information relating to money laundering and more economic threats. wide. It was considered internationally as an example of good practice. Through collaboration with financial institutions and law enforcement agencies, JMLIT is said to have made considerable progress in the fight against financial crime.

The idea of ​​collaboration is very powerful right now because criminals tend to use multiple channels, and when they are banned from one channel to another.

Formal collaboration can create accountability of peers, a safety net for the private sector, and increased integrity of the financial services sector. It has the potential to encourage the private sector to be more proactive as the first line of defense against financial crime.

Muthaura is Director, Financial Crime Control



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