In a keynote speech to Singapore bankers, the FATF chairman is seeing a post-pandemic wave of tech-based financial crime.

Much of our day is spent in the digital realm, with many of us forced to spend most of our working hours hunched over computers or tablets, puzzling over emails. 

But that is only the start. Have you ever tried to manage your screen time on your mobile phone? Even if, say, you’re a principled no-gamer, it quickly becomes apparent that you are still spending an inordinate amount of time on Whatsapp while consuming a range of other social media such as YouTube, Instagram, and Tik Tok.

Well, apparently, the criminals are keeping right up there with us. That at least is the take from T. Raja Kumar, the president of the Financial Action Task Force (FATF) who delivered a keynote speech at the Association of Banks in Singapore (ABS) early Wednesday.

Clear Warning

As finews.asia previously reported, he is a Singapore public servant who assumed a fixed two-year term at the global money-laundering watchdog in 2022.

But he had several important takeaways in his speech, some of which are more akin to very unambiguous warnings. Although digitalization in the post-pandemic age has brought untold benefits to consumers, it is also a double-edged sword.

«Criminals and terrorists alike have rapidly adapted to technology and are exploiting this for nefarious purposes. The sharp trajectory of growth of such crimes means that the situation is poised to get far worse,» Kumar indicated. 

New Attack Vectors

The «unintentional consequence» of the convenience of digital tools in finance has opened, what he calls, «new attack vectors» for criminals.

«Criminals are able to move illicit funds more rapidly, more easily than ever before – exploiting technology and rapid payment systems to move their ill-gotten gains quickly across one or more jurisdictions to mask the money movement trail and stymie law enforcement,» Kumar said.

As a result, the FATF will cut the cycle of the fifth round of its widely feared country mutual evaluations to six years from the current 10-11 years. These are expected to start in 2025 and are again aimed at ensuring that jurisdictions keep pace with the changing environment.

«It will not be sufficient to just have the necessary legislation and frameworks in place. Countries need to clearly show that they are effective in achieving outcomes,» Kumar stated. 

Very Low Number

One of the key areas the FATF will focus on in the immediate future is asset recovery, as current estimates indicate that 1 percent of illicit money is recovered by law enforcement agencies, which is a very low number.

According to him, it means that «criminals continue to reap, retain and enjoy profits from their criminal activities – sadly crime is paying well in many areas».

In truth, the FATF can only set global standards and then hold countries to account and publicly identify when they start to come up short.

Travel Rule Non-compliance

When it comes to that, the news is not altogether good. The FATF strengthened standards in 2019 to prevent virtual assets from being used for crime or terrorism, which in the industry has since become more widely known as the «travel rule».

According to him, four years later, the implementation of its enhanced Recommendation 15 remains low globally, with more than half of countries responding to a recent survey saying that had not yet taken any steps to implement the rule.

«This lack of regulation creates significant loopholes that criminals have exploited and must be closed,» Kumar maintained.

Naming and Shaming

Given this, the FATF intends to publish a table that details the steps taken by member jurisdictions as well as other countries that have significant virtual asset activities.

That «naming and shaming» approach has done the FATF good service in the past, as most governments and their enforcement bodies have not taken altogether kindly to getting caught out, flat-footed.

But, still, the current challenges the FATF faces are complex. According to him, they require «not just a Whole of Government approach, but a Whole of Society approach to tackle them».