New Research Reveals Over a Third of Banks Struggle to Spot Signs of Human Trafficking in Their Systems

• New global research shows that banks and financial services professionals are failing to get a grip on the 22 money laundering crimes outlined by the 6^th Anti-Money Laundering Directive
• As human trafficking rates rise, banks admit they struggle to spot the tell-tale signs in financial data

LONDON--(BUSINESS WIRE)--A new global research report published today has revealed that financial institutions are struggling to detect money laundering crimes.

The findings of the report, from BAE Systems’ Applied Intelligence business, suggest that banks are unable to keep up with the 22 crimes defined by the EUs 6^th Anti-Money Laundering Directive, with human trafficking emerging as one of the most prevalent problems.

The report is the combined study of two global pieces of research among 452 respondents working in compliance or risk management across the financial services sector and more than 6,000 consumers in six markets.

Human trafficking: a very real threat in 2020

According to the UN, there are an estimated 25 million victims of trafficking worldwide, making this crime one of the most prevalent money laundering offences globally. The problem continues to rise with banks and other financial institutions struggling to spot and stop offences among their transactions. The most recent research from BAE Systems found over a third (36%) of financial services professionals aren’t confident in spotting signs of human trafficking in their customers’ transactions. A further 28% have stated that financial crimes leading to human trafficking already account for significant financial losses for them. And, looking at further recent data, the projected total cost to financial institutions to detect financial crime stands at $180.9 billion globally, $138.8 billion in Europe.

Further to this, over a quarter (26%) of financial institutions admitted to having to report and investigate criminal financial activity linked to human trafficking and almost three-quarters (75%) aren’t confident in their ability to identify human trafficking signs amongst transactions.

Customers willing to leave banks that don’t demonstrate a strong ethical stance

Having a conscience is key to brand loyalty according to the consumer respondents surveyed. Three-quarters (75%) of customers would leave their bank or financial institution if they fail to demonstrate proactive approach to money laundering/ethical practices linked to money laundering. 84% of those surveyed globally believe that it is important for banks to demonstrate conscience through good ethical practices. When the financial institutions were questioned on this same topic, almost a half (43%) report money laundering to regulatory bodies as they understand customers want to know their bank is ethical.

How many banks have an anti-money laundering strategy in place?

With human trafficking representing such an enormous part of the overall money laundering challenge, more financial institutions need to consider a better anti-money laundering strategy moving forward. However, almost a fifth (19%) of the FI professionals surveyed globally currently still do not have a strategy in place to combat the most heinous money laundering crimes. There is also a very real and present danger that COVID-19 will get in the way and provide a major setback. Three in four (72%) responded that COVID-19 has impacted their approach to tracking and stopping money laundering and has dramatically impacted their ability to spend in the short term. 43% of banks and insurers also stated that they want and need better technology as part of their five-year strategy to combat money laundering.

Peter Fisher, Financial Crimes Product Director at BAE Systems, commented:

“Money laundering is a challenge that goes way beyond financial risk and corporate reputation. Yet it is also shrouded in opacity.

At this moment, criminals are rushing to take advantage of every opportunity to exploit gaps in the global financial system. They look for vulnerabilities in the industry’s defences – whether that’s environmental, jurisdictional, or technological – and it is the role of the financial institutions compliance professional to close these gaps as much as possible.”

Other stats include:

Top 10 money laundering offenses of most concern to financial services professionals	Top 10 biggest financial impact on financial institutions
Fraud Corruption Participation in organised crime Cybercrime Terrorism Illicit trafficking in narcotic drugs Tax crimes relating to direct and indirect taxes Trafficking in human beings and migrant smuggling Insider trading and market manipulation Piracy	Fraud Corruption Trafficking in human beings and migrant smuggling Terrorism Participation in organised crime Illicit trafficking in narcotic drugs Illicit trafficking in stolen goods Sexual exploitation Piracy Counterfeiting of currency
Top 10 money laundering concerns for financial services professionals	The state of money laundering – according to financial services professionals:
Impact on image of industry Personal/professional reputational damage Innocent customers are being defrauded Financial cost to business Its impact on our own corporate reputation The human cost of the criminal activities Our difficulty to stop illegal transactions Inadvertent contribution to criminal activity Difficulty in identifying it Difficulty to prevent it happening	89% are concerned about money laundering 61% admit it’s hard to uncover evidence of human trafficking through financial transactions 1-in-3 complain that too few suspicious activity reports result in justice Over 1/2 want to help protect society from financial crime One-in-five say they don’t have an anti-money laundering strategy in place 43% agree they need better technology to help 44% intend to invest in more people 72% have had their AML approach impacted by COVID-19
The state of money laundering – according to consumers	Global comparisons
Over 1/2 are aware of and concerned about money laundering 3-in-4 want FIs to be more transparent about money laundering 84% agree FIs should demonstrate conscience through good ethical practices 3/4 would leave for another provider if they suffered a series of illegal transactions	9 in 10 (90%) of FIs in Australia said that COVID-19 has impacted their anti-money laundering technology investments, against a global average of 72% 69% of FIs in the US said that they have had to investigate transactions linked to human trafficking, much higher than other reported markets A third (34%) of UK FIs stated a lack of anti-money laundering support from law enforcement

To read the report please visit: www.baesystems.com/GlobalStateofAML

Notes to editors

To ensure a holistic view of the Anti-Money Laundering landscape, two surveys were conducted by Atomik Research to inform the research report. The research was conducted in six markets: UK, USA, France, Germany, Australia and Singapore. 1. Qualitative research amongst 452 financial professionals in key roles working in compliance or risk management across Financial, Business, Banking or Insurance industries. 2. Quantitative research amongst 6,035 consumer respondents aged 18 – 65+.

About BAE Systems Applied Intelligence

At BAE Systems Applied Intelligence, we help nations, governments and businesses around the world defend themselves against cybercrime, reduce their risk in the connected world, comply with regulation, and transform their operations. For further information about BAE Systems Applied Intelligence, please visit www.baesystems.com/ai.