EU regulators issue money laundering warning as criminals adapt to Covid-19
03 Apr 2020

Europe’s top banking regulator is instructing financial institutions to pay closer attention to transactions linked to international trade, as the effects of Covid-19 prompt criminal groups to seek new ways of moving illicit funds and goods across borders.

In a series of statements issued on Tuesday evening, the European Banking Authority (EBA) warns national regulators and banks that evidence is already emerging of new criminal activity linked to the deadly spread of the virus.

“As most economies are facing a downturn, financial flows are likely to diminish. However, experience from past crises suggests that in many cases, illicit finance will continue to flow,” says one statement from the EBA, which stands as the EU’s most senior regulator for compliance with money laundering rules.

“For example, there is already some evidence of increased levels of cybercrime, Covid-19-related frauds and scams targeting vulnerable people and companies, of fake fundraising campaigns and of criminal networks selling rationed goods at a higher price.”

The authority singles out international trade as a potential risk area. It says banks processing payments linked to trade transactions should take additional measures to establish whether unexpected flows – particularly linked to customers or regions badly affected by the virus – are of legitimate origin.

An EBA official tells GTR: “Involvement in international trade is not, of itself, indicative of higher money laundering or terrorist financing risk. International trade is, however, likely to be affected as a result of both the current pandemic and restrictive measures put in place by governments to manage the spread of Covid-19.

“This means that financial flows from many companies that are involved in international trade will be expected to reduce.

“Where against expectations they do not, the statement makes clear that institutions should examine the background and purpose of those unexpected – unusual – transactions to determine if they give rise to suspicion or if instead an economic reason or lawful explanation can be found.”

At the same time, supervisors at national level are encouraged to adjust supervisory activities in a pragmatic and risk-sensitive way, for example by postponing on-site examinations where not deemed essential and by making greater use of virtual meetings and inspections.

A secondary risk linked to the slowdown in international trade is an increased risk of attempts to bribe officials monitoring the movement of goods, says John Burbidge-King, chief executive of anti-bribery and corruption consultancy Interchange Solutions.

“We now know that a lot of countries have closed down airports, handling facilities and ports are getting difficult to get goods through,” he tells GTR. “The opportunity to bribe customs and other officials for those that are open, or where there are vague openings, is very high indeed, and that’s very serious.”

By John Basquill, Global Trade Review, 1 April 2020

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