Economic Crime: ‘Reflections from a life on the frontline’

Looking forward to 2023, against the backdrop of a rapidly evolving economic crime landscape, it is time for me to pause and reflect…

I was privileged to command economic crime investigations across the National Crime Agency. This experience vividly illustrated the complexity of these cases, whilst highlighting the skills, expertise, and specialist capabilities that are vital for success.

Working with partners across law enforcement, government and the private sector reinforced for me the power of collaboration and intelligence sharing.

I now welcome the opportunity to continue this work as Head of  Policing and Government at Clue Software, a provider of leading investigation and intelligence management software that’s trusted by investigation professionals globally.

I will be posting regular insights on economic crime for my network while exploring the increasingly important role of technology in combating it. I am also very keen to hear views and contributions from you all to increase the breadth of thought leadership in the field.

Please comment, or message me with your thoughts.

The context

I have seen first-hand how economic crime threatens national security, the economy, society, and citizens. Broadly, the adverse impacts include:

• Criminals benefitting from the proceeds of crime which funds more crime globally
• Damage to financial systems and the interests of legitimate business
• Undermining national prosperity and reputation
• Causing financial losses to individuals, businesses, and government

Fundamentally, it boils down to a single truth; economic crime funds organised crime groups, terrorists, and other malicious actors, who do us all great harm.

What is economic crime?

Economic crime as a concept may not be familiar to all, so I will now unpack the crime types referred to under the economic crime umbrella.

Fraud

Fraud against individuals, businesses, and government is a rapidly growing and endemic threat. Its true significance has only recently been fully recognised, whilst responding to fraud is complex and challenging.

In my experience, fraudsters frequently exploit technology to access and deceive victims, or to move and ‘cash out’ proceeds. They also utilise false or fraudulently obtained identity documents or company registration materials to further their illegal aims.

I assess that 85% of fraud offending has an international dimension, with fraudsters operating from multiple jurisdictions globally and targeting victims in a wide range of countries. The most sophisticated fraud networks I have investigated featured international controllers, directing the criminal enterprise.

Many frauds are complex and compelling in nature; I have even seen criminals masquerade as a financial regulator to persuade victims of previous frauds to part with more money.

Fraud is now enabled by technology, such as cryptocurrency which allows criminals to easily ‘cash out’ proceeds.

Cryptocurrency is now increasingly part of the fraud ‘attack chain,’ either dangled as ‘bait’ to dupe the victim, or used to ‘cash out’ anywhere in the world.

Fraud against individuals, businesses, and government is a rapidly growing and endemic threat – its true significance has only recently been fully recognised.

In the UK (United Kingdom), fraud accounts for almost 50% of all reported crime, running at upwards of 4.5 million offences per year and impacting upwards of 3.6 million victims per year.

The annual costs to society run to tens of billions of pounds. The impact can be devastating, ranging from unaffordable personal losses to destroying the ability of organisations to stay in business.

However, only 1-2% of UK policing resources are focused on fraud and more alarming still, clear-up rates remain below 1%.

I suggest that this ‘state of the nation’ assessment provides a clear call to action for us all to do much better on fraud.

Money laundering and Illicit finance

Organised criminals, fraudsters and the perpetrators of international corruption are motivated solely by profit and the desire to benefit from their ill-gotten gains. To do so they must try to hide the true origins of their wealth and assets.

Servicing them are sophisticated money laundering networks, frequently assisted in masking the true origins of illicit finance by criminally corrupt professionals.

As [Operation Venetic] UK Gold Commander, I witnessed first-hand the operation, as it laid bare the true scale of money laundering in the UK organised criminal community…

I have investigated laundering networks using myriad methods, including cash smuggling, ‘hawala’ informal value transfer systems, trade-based laundering, money service bureaus, cash-rich businesses, and front companies.

Such networks frequently feature international controllers, directing multiple cash couriers, from locations around the world.

Operation Venetic was the UK response to the ‘takedown’ of a secure communications platform used by organised criminals in 2020. As UK Gold Commander I witnessed first-hand the operation, as it laid bare the true scale of money laundering in the UK organised criminal community, for the first time.

Interceptions enabled by our intelligence included countless examples, where hundreds of thousands of pounds at a time were recovered from sophisticated hides in courier vehicles.

At ‘cash houses’ recoveries of up to £5 million at a time occurred alongside industrial scale cash counting machines.

Led by the National Crime Agency, Operation Venetic saw investigators seize £77m in cash, 18 tonnes of drugs, and 170 firearms.

Our intelligence showed drug money being converted into cryptocurrency and moved offshore, where it was subsequently invested into land development deals suspected to have been enabled via corruption.

I assess that over £12 billion of criminal cash is generated and laundered in the UK every year.

If ever any evidence was needed to support the oft-used phrase ‘follow the money’ in serious and organised crime operations, this is it.

Bribery, corruption, and sanctions evasion

International corruption unlawfully denies populations the benefits of national resources when corrupt elites siphon billions for their own criminal benefit.

Major financial centres are favoured destinations to launder or invest the proceeds. It is assessed that over £100 billion is laundered through the UK, or UK corporate structures, including from Russia and other corrupt elites.

Of equal concern, in my view, hostile foreign state adversaries also seek to use financial ‘influence’, often derived from corrupt sources, as a vector to advance their malign aims and objectives.

Investigations into illicit finance derived via infamous ‘laundromats’ invariably include a money trail leading inexorably to the UK or other major centres.

Over £100 billion is laundered through the UK, or UK corporate structures, including from Russia and other corrupt elites.

While the original criminality is often from many years ago, and the subjects have effectively ‘laundered’ their finances, the investigation is however feasible via the criminal professional enablers that sustain them.

Whether criminally involved, ‘wilfully blind’ or unwitting, such enablers include lawyers, bankers, accountants, public relations firms, auction houses, security providers, yacht brokers, cryptocurrency brokers and estate agents.

Sanctions are another vital tool in the collective ‘armoury’, where effective data and intelligence sharing is critical to ensure that the collective knowledge of all relevant agencies is combined.

Sanctions can also be used effectively in broader economic crime terms. For example, I led the UK contribution to the sanctioning of the Kinahan Cartel by the US Treasury Office of Foreign Asset Control in April 2022, under an international organised crime operation.

Finally, bribery of public officials decimates public confidence in the state and undermines the rule of law, whilst corrupt payments to secure contracts distort legitimate business markets.

For all the reasons above we must take seriously our response to the threats of bribery, corruption, and sanctions evasion.

Lessons learned

Economic crime encompasses an evolving and complex suite of threats, which collectively undermine our economy, society, prosperity, and security. We must therefore treat them seriously and ensure an appropriate response.

There are gaps in our current response, but we are not starting completely from scratch. Far from it – much has already been put in place. However, the following themes provide us with areas of focus.

Global dimension

International connections feature across all economic crime threats discussed in this article. That includes ‘hard to reach’ or even outright hostile jurisdictions, where obtaining intelligence, securing, and preserving evidence, or achieving cooperation may be impossible.

International cooperation … to share intelligence and data between agencies is essential.

This can create additional barriers to success, but it can also be an asset because effective international cooperation is often the most powerful tool that we have available to target economic crime networks and subjects.

However, to maximise the opportunities from international cooperation, viable capabilities to share intelligence and data between agencies are essential.

Such capabilities are in my experience frequently inadequate or poorly optimised for effective digital interoperability.

Evolving technology

Economic crime invariably involves a substantial digital or cyber-enabled aspect, including but not limited to cryptocurrency or virtual assets.

The technology ‘arms race’ I have seen in other law enforcement contexts, such as cybercrime or encrypted communications, also features in economic crime.

Technology used by criminals frequently out-paces the technical capabilities of the agencies involved.

As fraudsters seek out ever more sophisticated technology-enabled means to gain access to potential victims, or to convince them of legitimacy, the complexity of the technical investigation increases with it.

Unfortunately, the evolving technology used by criminals frequently out-paces the technical capabilities of the agencies involved.

Disparate data – intelligence failure

Identifying the links between economic crime offences and offenders is also challenging. The same offenders may appear in different contexts, but the agencies responsible for disparate parts of the threat are often unable to effectively ‘join the dots’.

Identifying the ‘golden nominal’ is currently beyond the ability of most of the community.

This creates the risk of intelligence failure, due to data or intelligence being maintained within the organisational silos of an individual agency.

Therefore, identifying the ‘golden nominal’ – the same offender operating across multiple crime types and agency remits – is currently beyond the ability of most of the community.

Legacy technology, lack of interoperability and poor ‘end to end’ case management capabilities further compound these challenges.

High volume of data – disclosure failure

The risk of intelligence failure is exacerbated by the high complexity and high numbers of economic crime investigations that relevant agencies are faced with.

It is also compounded by the high volumes of data and material generated in the intelligence and investigative work required to take these individual operations forward.

Too often, complex operations are being run on spreadsheets, shared folders, or inadequate tooling.

In my experience crime fighters often lack the right tools and capabilities, including effective core case management, digital forensic and analytical functions they need in this critical area.

Too often complex operations are being run on spreadsheets, shared folders, or inadequate and unintuitive case management tooling.

Even in a low-volume environment this would be challenging, but in economic crime cases with extremely high quantities of data it can be overwhelming, and the risk of disclosure failure is therefore high.

Enablers of economic crime

The exploitation of ‘identity’ is also a major challenge to teams operating in this space. The use of forged, or genuine but fraudulently obtained, identification documents feature in many such cases.

Likewise, the exploitation of ‘front companies’, or other corporate structures, and the use of companies or trusts created elsewhere across the globe all contribute to the challenges of carrying out effective economic crime operations.

People, skills, and training

There are also well-documented challenges in terms of the ‘people’ requirement for successful economic crime investigation.

Due to the complexity of criminality, the involvement of cyber-enabled or digital components and the need for financial investigative capability, the right skills take time to grow, nurture and mature.

The very same skill sets are in high demand across public and private sectors, but the remuneration on offer often differs significantly. This presents the real risk of ‘brain drain’ from the very agencies charged with leading this work.

Risks of litigation by wealthy economic crime protagonists

Finally targeting the assets and wealth of high-net-worth perpetrators of international corruption, oligarchs, kleptocrats and high-end organised criminals is complex and high risk.

Civil casework is a critical tool. But the risks of adverse cost findings in the civil courts, when litigating very well-financed respondents is challenging for the agencies concerned.

It could be existential in the most extreme cases. The lack of any meaningful ‘backing’ to cover such adverse cost findings continues to be a challenge.

What next?

This article is my initial introduction to economic crime. I hope it ‘unpacks’ some of the crime types and threats that we all face.

I would also be delighted if the article provokes thought, debate, and stimulates ideas. I am therefore very keen to hear from my network on this subject and to understand your thoughts, suggestions, and proposals.

What would work from your perspective?

Next time, I will spend more time on the potential solutions and measures that the community could take to advance and improve our collective response to economic crime.

Follow Matt on LinkedIn for regular economic crime insights, and learn more about Clue for Economic Crime.