# Money laundering made easy by UK financial system
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-03-15
Category: Uncategorized
Category URL: https://financedigest.com/category/uncategorized
Meta Title: Combatting Money Laundering in the UK Financial Sector
Meta Description: Learn from industry experts like Graham Barrow about the loopholes exploited by criminals in the UK financial system and the urgent need for improved AML
URL: https://financedigest.com/money-laundering-made-easy-by-uk-financial-systemhtml

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_By **Caroline Hermon,** Head of Adoption of Artificial Intelligence & Machine Learning at [SAS UK & Ireland](https://www.sas.com/en_gb/home.html)_

Public trust in the banking sector has been shaken by a series of high-profile money laundering scandals over the last few years. The UK is a hotspot for financial crimes, as explained by the BBC’s recent Panorama documentary, [“Banking Secrets of the Rich and Powerful”](https://www.bbc.co.uk/iplayer/episode/m000mv1s/panorama-banking-secrets-of-the-rich-and-powerful). In spite of the adoption of anti-money laundering (AML) technologies across the financial sector, criminals continue to find a way.

The current protection banks have against money laundering isn’t enough, says Graham Barrow, presenter of [The Dark Money Files](https://www.thedarkmoneyfiles.com/) and contributor to Panorama’s documentary. I spoke with him to discover why we must all understand how money laundering exploits the UK financial system, and how the right approach will help to lessen the impact of the associated corruption, bribery and tax evasion on society as a whole.

**Criminals are banking upon [gaps](https://www.financedigest.com/utilising-digital-tools-to-close-the-finance-and-accounting-skills-gap.html "Utilising digital tools to close the finance and accounting skills gap") in UK financial system**

As Graham says in the programme, every major money-laundering scheme he’s ever investigated has had UK companies at its heart. The UK financial system has become central to international money laundering because it’s so easy to set up a company as a limited liability partnership (LLP) – with almost no checks on company ownership, [business activity](https://www.financedigest.com/euro-zone-business-activity-contracted-again-in-august-pmi.html "Euro zone business activity contracted again in August -PMI") or even accounts. Using these and other similarly opaque corporate vehicles, criminals can move dirty money without leaving a trace.

Some of the methods that criminals use are incredibly brazen – such as registering hundreds of companies at the same address and even filing identical accounts for each of them. To be fair, banks do typically comply with AML regulations by filing a suspicious [activity report](https://www.financedigest.com/rebound-in-the-oil-gas-exploration-and-production-activities-to-boost-mobile-servicing-rig-market-fact-mr-report.html "Rebound In the Oil & Gas Exploration and Production Activities to Boost Mobile Servicing Rig Market, Fact.MR Report") (SAR) whenever they detect this type of problem. Yet while these SAR red flags are often plain to see, they are still commonly ignored. Why?

**Suspicious activity reporting** [needs an overhaul](https://www.financedigest.com/traditional-banks-need-an-overhaul.html "Traditional banks need an overhaul")

The SAR process is critically flawed because the volume of reports is so high, and the regulatory resources devoted to handling them are so limited. In the UK alone, [banks file around 2,000 new SARs every](https://www.financedigest.com/how-to-nail-your-banking-audition-every-time.html "How to nail your banking audition every time") day. And there are only about 100 people reviewing and investigating them.

Contrast this with one of Graham’s recent investigations, where 400 specialists from the International Consortium of Investigative Journalists (ICIJ) put a leaked set of just 2,300 SARs under the microscope for several [months to piece together the shocking story of a huge](https://www.financedigest.com/investors-flee-uk-bonds-pushing-gilts-to-huge-monthly-loss.html "Investors flee UK bonds, pushing gilts to huge monthly loss") international laundromat for dirty money.

Without this kind of dedicated, focused resource, it’s likely that the [majority of SARs that banks](https://www.financedigest.com/major-myths-and-questions-holding-banking-and-financial-services-back-from-full-digital-id-adoption.html "Major myths and questions holding banking and financial services back from full digital ID adoption") file won’t even get reviewed, much less investigated. There needs to be a better way to handle the flood of incoming [data on suspicious activity so that investigators can focus on the biggest and most serious flows of illegal money](https://www.financedigest.com/your-money-is-safe-but-your-data-might-not-be.html "YOUR MONEY IS SAFE, BUT YOUR DATA MIGHT NOT BE").

**Upskill investigation teams to boost algorithmic power**

As Graham told me, we [need to utilise the power that SAS and other analytics companies](https://www.financedigest.com/why-companies-need-to-rethink-retirement-tips-for-ensuring-a-happy-life-in-later-years.html "Why companies need to rethink retirement – Tips for ensuring a happy life in later years") can bring to help AML teams isolate the signal from the noise so they’re not spending 98% of their time reviewing false positives.

Better [collaboration between AML specialists and technology teams is a key](https://www.financedigest.com/white-bullets-collaboration-with-polands-sygnal-association-makes-a-significant-dent-in-ad-funded-piracy-in-this-key-european-market.html "White Bullet’s collaboration with Poland’s Sygnał Association makes a significant dent in ad-funded piracy in this key European market") area for improvement. Graham shared a story about a bank that had never updated the rules it used for transaction [monitoring because its investigation team didn’t have the skills to update the system](https://www.financedigest.com/vehicle-speed-monitoring-system-market-key-players-swot-analysis-key-indicators-and-forecast-to-2026.html "Vehicle Speed Monitoring System Market Key Players, SWOT Analysis, Key Indicators and Forecast to 2026"). Graham [decided to convene a regular meeting where investigators could present difficult cases](https://www.financedigest.com/belgian-court-decides-to-keep-eu-corruption-case-suspect-in-detention.html "Belgian court decides to keep EU corruption case suspect in detention") to the bank’s technology team. And as soon as the tech team understood the problem, they offered to write new algorithms that would catch a higher percentage of suspicious transactions. Building a forum where AML experts and technologists can [come together and establish a shared](https://www.financedigest.com/ophthalmic-devices-market-share-to-exhibit-steady-growth-in-the-coming-decade.html "Ophthalmic Devices Market Share to Exhibit Steady Growth in the Coming Decade") vocabulary is vital if you want to make progress.

**AI can search for tell-tale signs of fraud**

There are also big opportunities for new technologies, such as [artificial intelligence](https://www.sas.com/en_us/insights/analytics/what-is-artificial-intelligence.html) and machine learning (AI/ML), to contribute to the fight against international money laundering. Especially for identifying patterns in unstructured data, such as text documents and audio recordings. These techniques offer great potential to help [investigators find the needles of financial crime](https://www.financedigest.com/australia-financial-crimes-regulator-opens-investigation-into-britains-entain.html "Australia financial crimes regulator opens investigation into Britain’s Entain") in a vast and ever-growing haystack of SARs. The main challenge, at this point, is transparency. AI-based techniques are often a black box, but we will need the results they produce to be explainable, as well as accurate, if we’re to [shine a light](https://www.financedigest.com/playground-xyz-shines-a-light-on-the-nuanced-interplay-between-context-creativity-and-attention-for-advertisers-in-new-study.html "Playground xyz shines a light on the nuanced interplay between context, creativity and attention for advertisers in new study") on the inner workings of the world’s greatest criminal machines.

**[Technology helps to limit the impact](https://www.financedigest.com/how-can-technology-impact-public-health.html "How can Technology Impact Public Health") of money laundering on society**

[Money laundering may be the banks’ problem](https://www.financedigest.com/the-problem-with-current-anti-money-laundering-processes-a-lack-of-context.html "The problem with current Anti-Money Laundering processes: A lack of context") to solve initially, but those deploying AML tech must understand the bigger picture. I’ve spoken with fraud experts and engineers at some of the UK’s biggest banks, and it’s clear that those who know the true cost of [money laundering](https://www.financedigest.com/anti-money-laundering-doesnt-have-to-be-a-painfully-inefficient-process.html "Anti-money laundering doesn’t have to be a painfully inefficient process") have an even greater drive to find the tools to help bring it down.

What seems a white-collar crime on the surface has a far deadlier [impact once laundered money](https://www.financedigest.com/digitisation-of-banking-the-impact-of-digital-money.html "Digitisation of Banking: the impact of digital money") is cleaned. Used to fund further criminal activity, fraudulently-acquired money leads to an increase in bribery, corruption, fraud, drug and people trafficking, and more. [Banks must](https://www.financedigest.com/lost-in-translation-why-banks-must-learn-the-language-of-their-customers.html "Lost in Translation: Why Banks Must Learn the Language of their Customers") consider their role in keeping society safe as they look to the experts to help patch up the cracks criminals are exploiting in the UK financial system. Only by understanding the monumental value of strong [AML technologies will banks be able to commit to investing in the technologies and strategy to properly tackle money laundering](https://www.financedigest.com/are-compliance-and-anti-money-laundering-aml-regulations-hurting-your-sales.html "Are compliance and anti-money laundering (AML) regulations hurting your sales?").


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