“The root of the problem is that the economic incentive is always going to drive criminals to innovate and take risks,” says Scott Hanson, Director, Public Policy & Regulation at IFAC. “They're always got that motivation to stay two steps ahead.”
Add to that the accelerated pace of technological change, and the challenge is augmented exponentially. “The unfortunate news is that for every door that policymakers, law enforcement, and their professional allies, like accountants, close, technology opens new ones that criminals can exploit,” he says. “Of course, it is challenging, and at times discouraging, but combating economic crime is just too important and not doing so is too detrimental to society.”
But the problem is huge, albeit not insurmountable. “Technology is every bit as much of an ally, or tool, for us as the good guys as it is for the criminals,” says Hanson. “We can be more effective in information sharing. We can build more effective and harmonised global regulatory systems. Ultimately, all of that is a question of working smarter.”
Then layer on the impact of COVID and the unprecedented level of government intervention. “The issue is less about the volume than about the speed of spending,” says Hanson. “Much of this COVID response spending has been done on an emergency footing, and rightfully so. However, this is exactly what increases the vulnerability to fraud, embezzlement, misdirection, or whatever term you wish to use.”
So, who informs IFAC’s work in this area? Where does it get its reference points? “One of our key functions is engaging with global NGOs and representing the profession,” says Hanson. “We engage with the Financial Action Task Force (FATF), which is the global standard-setter for money laundering, the OECD, the G20, INTOSAI (International Organization of Supreme Audit Institutions), and these types of organisations.” On top of those are the professional accountancy organisations (PAOs), like ICAEW, that interface with domestic law enforcement authorities and other relevant bodies.
“We engage very closely and work in partnership with our members like ICAEW,” he says. “They are our eyes and ears at a domestic level to help feed into our understanding.”
But economic crime – and of course COVID – are best dealt with at the international level, informed by local evidence. It all comes down to global cooperation and local implementation. “Cooperation is key,” he says. “Who would have thought that SDG17 was the most important one in this regard – the last one on the list and it's the global cooperation one. Global cooperation is the overarching theme that's going to get us to help solve all these global problems.”
We need an ecosystem approach, Hanson says. “In terms of fighting financial crime, every actor within that ecosystem needs to be playing its part. So, there are the policymakers, the public policy framework, law enforcement, civil society, allies like accountants, lawyers and other professionals,” he says. “That's why we try to encourage and inspire other parts of the ecosystem to do their part more or better, and we can try to do the same.”
There are many tools to facilitate this effort. Know your client due diligence tool providers are at the heart of this. “It's great to see that there's so much effort and creativity being put into making those critical and laborious tasks more effective and efficient,” he says. “At the same time, you've got to recognise that these tools can only do so much, and human judgement is always going to be a vital component of knowing your customer.” Hanson is emphatic that there is a huge overlap between the core skills of accountants and what it takes to fight financial crime.
He then comes on to beneficial ownership registries and is clear that these registries are not a panacea for solving economic crime. The United Kingdom has one, as does Jersey, and the European Union is moving in that direction. “Criminals are always going to have this strong economic motive to commit crimes and will game the system. The result is that the beneficial ownership registries won't necessarily have actionable accurate information on the type of criminal matters we're trying to stop. So, it's an issue of information quality.”
He says it is important to stay focused on what we're trying to achieve – delivering better outcomes in the fight against economic crime. Where will we end up if the professions do not get better at this? “Financial crimes are not fads. These issues are going to remain. They're going to continue to be central to accountancy going forward. It's incumbent on professional accountants to play a proactive role in that ecosystem of fighting financial crime,” says Hanson.
PAOs – like ICAEW – are the resource to help educate and equip their membership, he says. If PAOs are not in a position to do that, IFAC is there to support. “We educate, we advocate, and we engage. The accountants around the world are on the frontline of the war on economic crime,” he says.
Hanson is clear that international cooperation is a slow, long game. “If you look back over the last 100 years or so, it is remarkable the degree of progress we've made on international cooperation, and it is getting better. COVID has given us a little bit of a kick to do more together. So that's hopeful. There's a lot of great people who are passionate about doing the right thing. And a lot of those people are accountants,” says Hanson.
“Overall, we are making good progress and the trajectory is in the right direction.”