More than eight in 10 UK banks are concerned that money laundering is currently happening in their customers’ transactions.

A combined study of two pieces of research, covering 452 professionals working in compliance or risk management across the financial services sector and more than 6,000 consumers in six markets, for BAE Systems’ Applied Intelligence business, found that banks are struggling to keep up with the 22 crimes defined by the sixth Anti-Money Laundering Directive.

The report found that human trafficking emerged as one of the most prevalent problems for financial institutions, with nearly half (47 per cent) admitting to having to investigate criminal financial activity linked to human trafficking.

In addition, 40 per cent were not confident in their ability to identify human trafficking signs amongst transactions. Only one in five banks stated they were confident they could stop transactions or behaviour linked to the trafficking of human beings.

According to the UN, there are an estimated 25 million victims of trafficking worldwide, making this crime one of the most prevalent money laundering offences globally.

The most recent research from BAE Systems found that a third of UK banks have revealed that human trafficking already accounts for significant financial losses and, recent data suggests that the projected total cost to financial institutions to detect financial crime stands at $180.9 billion globally - $138.8 billion in Europe.

The study found that 14 per cent of the financial institutions surveyed still do not have an anti-money laundering strategy in place.

There is also a danger that COVID-19 will provide a major setback to efforts to resolve this problem, with 72 per cent stating that it has dramatically impacted their ability to spend in the short term.

A total of 43 per cent of banks and insurers also stated that they want and need better technology as part of their five-year strategy to combat money laundering.

Peter Fisher, financial crimes product director at BAE Systems, commented: “Money laundering is a challenge that goes way beyond financial risk and corporate reputation - yet it is also shrouded in opacity.

"At this moment, criminals are rushing to take advantage of every opportunity to exploit gaps in the global financial system," he continued, adding: "They look for vulnerabilities in the industry’s defences - whether that’s environmental, jurisdictional, or technological - and it is the role of the financial institutions compliance professional to close these gaps as much as possible.”

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