Preventing financial crime

Examples of financial crime

All around the world, countries are facing rising economic and social costs due to human trafficking, terrorism, corruption, drug smuggling, tax evasion and other forms of illegal activities.

Tracking down and stopping the money flow from these illegal activities are key to disrupting the criminals involved. This is why financial institutions are uniquely placed to be part of the solution.

Money laundering generally refers to attempts to convert, conceal and acquire funds which are proceeds of criminal activity. If successful, the funds may lose their criminal origin and appear legitimate. Criminals are eager to conceal the illegal origin of the funds, so they are less likely to attract attention. 

Read more about the EU legal framework on anti-money laundering here.

Terrorist financing is the process by which terrorists fund their operations. It includes  the collection or provision of funds with the intention of using them for terrorist acts or to support terrorist organisations. An important difference between terrorist financing and money laundering is that funds used for terrorist financing may stem from both legitimate and criminal sources, whereas funds are always the proceeds of crime in money laundering. 

Sanctions are issued by national and supranational organisations like the EU, the UN and the US Treasury with the purpose of influencing a certain unwanted behaviour or policy by other countries, persons or groups, for instance certain terrorist groups.

Typical sanctions-related restrictions include asset freezes, arms embargos, travel bans, export/import bans and prohibition on providing certain specified services. Certain sanctions programmes can include restrictions on providing financial services. 

Sanctions have an impact on financial institutions through restrictions on the provision of goods and services and the movement of funds involving sanctioned countries, individuals and entities.

Violating sanctions is a severe offence and may result in monetary fines, regulatory enforcement actions and/or criminal charges. 

Bribery is a promise, request, offer, acceptance or transfer of a benefit in exchange for an action which is illegal, unethical or a breach of trust. 

An example of an action could be providing a benefit in exchange for ensuring that key competitors in a business deal are eliminated from the short-list on artificial grounds. This benefit may for instance be money, a gift, loan, fee, reward, service, donation or favour. 

Corruption is the abuse of entrusted power for private gain. 

Examples of corruption could be:

  • Public servants demanding or taking money or favours in exchange for services.
  • Politicians misusing public money or granting public contracts to their sponsors, friends and families. 
  • Corporations bribing officials to get lucrative deals.

Tax evasion is illegal evasion of taxes by an individual, corporations or other entity. Tax evasion may take the form of not paying or underpaying taxes. 

Fraud is a broad term used in reference to activities that involve the use of deception or dishonesty to generate illegal proceeds.

Examples of fraud include identity theft for monetary gain, brand abuse and credit card scams. Criminals often pull off these and other types of fraud by using “social engineering”, which is tricking people into revealing sensitive information, opening a malicious file or taking other actions that serve the motives of the criminal.