Anti-cyclical money laundering

MLROs and their staff love feedback, and so it has become the norm for most FIUs (Financial Intelligence Units – responsible for receiving and processing suspicious activity reports, or SARs) to issue statistics.  The headline figure is always the total number of SARs received, which is then divided into sector, and reason for disclosure, and number requiring consent, and location of subject, and so on.  This week it was the turn of the Italians, and their FIU – the Unità di Informazione Finanziaria (it sounds like opera, doesn’t it?) located within the central Banca d’Italia – reported to parliament that SARs have increased by 147% over the past two years.  Anna Maria Tarantola, deputy director of the Banca, said (in Italian, I assume): “Money laundering is anti-cyclical, and so it increases in times of crisis”.

The explanation for this is the mafia: as banks tighten up on lending, criminal networks step in with – as they say – an offer you can’t refuse.  According to a report from campaigning anti-crime organisation SOS Impresa in January 2012, organised crime groups in Italy generated a total income of 140 billion euros – 7% of the country’s GDP – and had more cash on hand than any of the country’s banks.  Alberto Mingardi, director-general of economic think-tank the Bruno Leone Institute, agrees: “The grip of the mafia on the Italian economy is particularly strong now because the mafia has cash.  And you’ve got plenty of small business, especially in the south and the centre of the country, that are running short of cash and have some kind of relationship with the mafia because they were forced for many years to buy protection from the mafia.  They may turn to the mafia as investors in their capital; they may go into the black sector for getting money they cannot get out of the official banking sector.  This is very troublesome.”  Signor Mingardi’s solution?  The Italian government should reduce taxation, so as to make more legitimate money available to Italian businesses in order to reduce their reliance on borrowing from the mafia.  Well, we all know that Italians in general are frankly crippled by the amount of tax they are currently forced to pay…

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4 Responses to Anti-cyclical money laundering

  1. It is troublesome when the state nor banks encourage the ordinary man to have a small business…

  2. Absolutely true – it’s the predictable pendulum swing from “credit for all” to “money for no-one”. We certainly don’t want to create a situation where “customers” are driven into the hands of organised crime groups.
    Best wishes from Susan

  3. Paul Coleman says:

    Slightly different reaction to your comments – the increasing number of SARs seems fairly widespread. First thoughts “Are we (meaning the world) losing the battle against money laundering” but on reflection I would like to think that we are just getting better at spotting suspicious activity and likely money laundering, and hence the statistics are showing the real scale of the problem. Do you ever discuss this observation in your presentations?

    Regards paul

  4. Hello Paul
    Funny you should say that – in the lead article of the current “Money Laundering Bulletin”, Timon Molloy writes: “Perhaps any adjustments in the invariably massive estimates of laundering volumes merely signal better measurement rather than a real change in magnitude.” The same could apply to SARs, as you say: is it just better measurement (i.e. suspicion of money laundering) rather than a genuine increase in occurrence? It’s not something I discuss in general training, but it does come up in sessions with MLROs and more deep-thinking Boards.
    Best wishes from Susan

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