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Money laundering trends to expect in 2023

  • Written by Milan Cooper, First AML CEO
First AML founders Left to Right Bion Behdin, Milan Cooper, Chris Caigou
First AML founders Left to Right Bion Behdin, Milan Cooper, Chris Caigou

Last year saw a spate of controversies in the money laundering (ML) space and made clearer than ever the target on Australia’s back as a ML haven, given its lax AML laws. As we wait for the implementation of Tranche 2, a huge step towards protecting Australians from the social, political and economic implications of ML, AML software company First AML reveals the ML trends we can expect to see this year.

Firms will struggle to balance making money with managing risk in 2023

Money launderers are getting smarter, and one of the biggest challenges firms will face in 2023 is balancing making money with managing risk. The recession could increase ML, with companies less likely to scrutinise and more likely to deprioritise compliance staff.

The biggest problem with ML is that it is highly profitable. Not only for the launderers themselves but for all the professional service firms who engage with them as they are essentially ‘deal makers’. Recessions can cause businesses to become more desperate to retain revenue. They may be more willing to deal with higher risk transactions and will likely scrutinise transactions less. This is especially true if they are high value, which ML transactions usually are. Recessions could also lead to firms de-prioritising compliance staff, who are already overworked at the best of times. 

The Real Estate, Law and Accounting sectors will remain targets for money laundering  

Until Australia implements Tranche 2, the Real Estate, Law and Accounting sectors will remain the most targeted sectors for ML across the board and the trend is expected to continue into 2023. Particularly Real Estate, which is attractive to launderers in many ways. It’s a great way to wash significant sums of money, can be leveraged at a later date, a lot of firms that operate in the sector have notoriously poor incentive structures which prioritise faster transactions rather than compliance, and with the market tightening, cash goes further. Billions of dollars are funnelled through the Australian property market, and it’s a serious problem for Australians.

Money laundering will be easy in the Metaverse, and launderers will exploit web3 as it develops

If the Metaverse actually takes off, ML will become a real issue. Digital assets are a fantastic tool for laundering money as they are essentially endless. The trade of digital assets is opaque and until more regulation is imposed on digital assets, it’s a great way for people to launder large amounts of money.

Similarly, as web3 starts to develop and mature, it’s likely we’ll see money launderers exploiting this space in more creative ways. 

Technology will continue to make AML processes quicker and more efficient 

On the topic of advancing technology… Technology has the ability to speed up the time it takes to verify entities and individuals, and it will vastly increase productivity across the AML sector over the next few years.

The best thing about regulation is it doesn’t only affect one business, but all competitors in the same way. Therefore, if businesses can streamline by processing faster, cheaper, and more effectively, it will lead to more satisfied customers, lower risk of reputational damage and happier staff (who hate doing manual AML). This will allow businesses who adopt and use AML technology to out compete their competitors.

Specialist AML partners will increasingly be relied upon 

Companies will continue to grapple with balancing cost, speed and transparency of business transactions in a competitive and volatile economy. As such, they will have no choice but to rely on specialist partners to keep them up to date with relevant AML legislation and ecosystem changes.

Regulatory authorities’ thirst for intelligence will continue to increase

Companies are far more interconnected than ever before, central regulatory authorities know this and recognise the intelligence that can be gleaned from cross border payments to signal ML or other criminal activities. We expect to see an increasing demand from central regulatory authorities for more granular intelligence from reporting entities, especially those in finance.

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