Financial crime is all around us. It ranges from the near comic deepfake messages seeking money and purporting to come from Daniel O’Donnell, to the more menacing money-laundering activities of criminal gangs. It costs the Irish economy hundreds of millions of euro every year and hits every one of us in the pocket in the form of higher taxes and increased costs of goods and services.
“Put simply, financial crime covers the gamut of behaviours looking to make a profit off illegal activities,” explains Colm O’Flaherty, a director with the Deloitte Financial Crime Advisory team. “It covers everything from obvious examples like theft, fraud and drug trafficking to more niche cases of bribery and corruption or horrendous cases of criminals trying to make money from human trafficking and child exploitation.
“Financial crime also covers specialised categories such as the application of financial sanctions by governing bodies and the methods that terrorists use to fund their operations.”
According to Katherine Gillespie, KPMG managing director and Forensic team leader, financial crime manifests in many different forms and affects businesses and individuals.
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“From an individual’s perspective, the more visible instances of financial crime tend to be online fraud, payment-card fraud, phone scams and other investment related scams,” says Gillespie. “Unfortunately it is ever more common to hear stories of family members, friends or colleagues being duped into making bank transfers or investing significant sums of money by increasingly elaborate and credible criminal schemes and online scams.”
Other forms of financial crime that are usually associated with businesses can also affect individuals and have a negative impact on our communities, she adds.
“These forms of financial crime involve money laundering, corruption, bribery, insider trading, tax evasion, financial statement fraud, asset misappropriation and embezzlement.”
Technology is making life easier for the criminals. O’Flaherty notes the Daniel O’Donnell scam as a case in point. Software can now replicate people’s voices and images, which can be used to get people to part with money.
“It can be your mother, brother, co-worker, anyone you trust – the images and voices can be very convincing,” he adds.
Money mule activity is on the rise in Ireland. Deloitte estimates the amount of money passed through mule accounts, where an otherwise innocent party has their account used to launder the proceeds of crime, to be have increased to €17.5 million in the State in the first half of 2023.
Money-laundering gangs are particularly targeting students and young people to become money mules, offering them small amounts of money to turn their accounts over for use in the money-laundering cycle. This can have quite serious outcomes for the often unwitting mules.
“If you give your account details to a financial criminal, that’s a crime as well,” O’Flaherty points out. “You are responsible for what happens to the money that goes through your account. People may not consider the consequences but it could mean they are barred from getting a US visa. People need to understand that.”
The impact on victims is even more serious. “Financial crime has a devastating impact on individuals because it is often the loss of hard-earned money that people can ill afford,” says Gillespie. “It can mean the loss of house deposits, retirement funds and rainy day money. As a result, victims of financial crime become more vulnerable and have less trust in those around them.”
Financial crime has a twofold impact on communities, she notes, since the likes of money laundering enables and perpetuates other forms of criminality.
“In addition, to combat financial crime it is necessary to divert public money and resources away from productive activities and investment that could otherwise have benefited our local communities,” she says.
“On an international level, financial crime transcends borders and makes it difficult to investigate and prosecute. Sadly, this means many instances of financial crime can go unpunished.”
The first line of defence lies with the individual, says O’Flaherty. “People need to understand how technology can be used to commit crime,” he adds “They should do the sniff test. It someone engages you in a conversation online or on the phone looking for money or bank account details or even offering you money, stop the conversation and think about it. Call the number on the back of your bank card if you are concerned about anything.”
He also points to a hole in our overall defence. “The banks here can’t speak to each other when it comes to financial crimes,” he says. “There is no mechanism for information sharing. Bad actors can run rings around them. If they are stopped by one institution they can move on and open an account somewhere else.
“It’s about information sharing. Ireland is in a great place, with all of the major social media and technology companies having headquarters in here. We should enable the financial institutions and the other players to come together to share information and knowledge to work together to prevent and address financial crime.”
Some level of financial crime will always be with us, unfortunately, but a change in attitudes towards it might help to reduce activity levels.
“I think there will always be people who want to exploit others for their personal gain so we will never be able to eradicate financial crime,” says Gillespie. “In addition, there are always people who will feel desperate and will do something out of character.”
She believes better education is required to make progress in combating financial crime and “to change the mindset of those that might think that financial crime is victimless”.
“Perhaps by better understanding the wider implications of financial crime, raising awareness, people will be both more vigilant and we could achieve a zero tolerance approach in society to financial crime in all its guises,” she adds.