Illicit Finance – What is it and How Can Consumers Protect Themselves?

Tackling fraud and money laundering is an on-going battle globally and according to the UK government, the criminal exploitation of the banks, professional and financial services and cash remains the greatest areas of money laundering risk to the UK. In 2017, the government announced they would be making it harder for criminals to move money through banks and businesses and help protect them from illicit financing. Now 3 years later and with the rise of scams and illicit dealings exploiting COVID-19, the focus is back on how businesses and consumers can protect themselves. So, what is illicit finance and how can the general public spot this type of fraud?

Illicit Financial Gains

Illicit financial flows, or illicit finance for short, refers to any activity of money being illegally earned, transferred, or spent. The idea is that this money is not recorded anywhere and is generated from many different avenues all for financial gain to the criminals. Through money laundering, illicit funds are then put through the financial and professional services sectors which according to the National Crime Agency (NCA), undermines the integrity of the UK’s financial system and international reputation. As there are many ways that illicit financing can be achieved, it can be difficult to spot these types of companies that seem legitimate but are in fact flowing money between countries illegally. The NCA actively monitors and intervenes this criminal activity and notes that due to the UK having a dynamic business environment with little restrictions, it is easy for criminals to establish a business that looks legitimate.A lot of the time, the illicit financial flows involve money coming from criminal activity in developing countries and laundered within banks through businesses set up in developed countries such as the UK, US and Europe.

To protect themselves, banks and financial services use anti-money laundering processes to limit this activity. In December 2018, Pay.UK’s Faster Payments launched anti-fraud technology named MITS (Mule Insights Tactical Solution) which enables suspicious payments to be tracked as they move between bank and building societies, creating a visual map where the money has moved and providing detailed data. Pay.UK’s Chief Executive Paul Horlock said the initiative is “a significant milestone in the UK’s fight against financial crime, giving the industry the potential to track the flow of illicit funds on a greater scale and with more speed and accuracy than ever before.” Faster Payments processed 201.2 million payments in April alone, meaning the technology covers a huge amount of the market. It is estimated £100 billion of illicit funds are laundered through the UK every year and between April 2019 and March 2020, HMRC seized £4.8 million via account forfeiture orders, an increase of £1.2 million on the previous year. So, with advanced measures in place and the NCA and UK government actively tackling the problem, are consumers protected from illicit funds completely?

Illicit Funds & COVID-19

As much as there are protective measures in place, consumers still need to be vigilant when it comes to the various ways criminals target for illicit financial gains. With COVID-19, there has seen a rise in exploitative activity looking to take advantage of consumers. This includes illicit pension transfers, high return investment opportunities and the selling of health supplements that do not work as well as personal protective equipment (PPE), which is then never delivered.According to the FCA, many tactics are being used where illicit funds are sought from offering COVID-19 related services and equipment. Good cause scams are where fraudsters will contact looking for investment towards hand sanitiser production or the manufacture of PPE, even drugs to treat coronavirus, with the promise of high returns on the investment. Similarly, scammers may take advantage of those currently in short term financial difficulties by offering lending but with an upfront fee between £25 – £450, a form of advance fee fraud. Recently there have also been concerns scammers posing as NHS contact tracers will take advantage of gaining information to access bank accounts to withdraw illicit funds. The UK government have released details on what information will and won’t be asked so that people can be vigilant.

It’s clear that the problem with illicit finance is an ongoing battle in the long term, with current economic issues such as those posed by COVID-19 providing criminals with new ways to exploit the general public and businesses. In 2019, a joint plan between the UK government, law enforcement and businesses was agreed to work closely together to tackle fraud, money laundering, bribery, and corruption. The Economic Crime Plan published in July, involves major financial institutions, legal, accountancy and property organisations in a joint effort to tackle ‘dirty money’. One of the main points from the plan was to reform the Suspicious Activity Reporting regime, with the major banks such as HSBC, Barclays, Santander, Lloyds etc. investing £6.5 million in 2019 and 2020 as well as longer-term funding.

Staying Vigilant in the Short Term

Whilst the government and financial institutions are working behind the scenes to protect their assets and their customers, the wider community is advised to stay vigilant. Being mindful that some things can be too good to be true will ensure consumers are vigilant with any scams like these. According to the FCA, there are several things the public need to keep in mind:

  • Never give out any personal or private details including bank details, addresses, and existing insurance/pensions/investment details.
  • Reject any unusual offers that come out of the blue
  • Check and establish a company’s credentials by using the Financial Conduct Authority (FCA) Financial Services Register. The FCA also have a ScamSmartwebsite where people can receive further guidance and also report scams.
  • Be wary of opening any emails or clicking links within them from senders you don’t know or recognise.
  • Be wary of any promised returns/financial benefits being offered.
  • Take the time to check all information thoroughly and avoid being rushed or pressured to make a quick decision.

Here at Wizzcash we are an FCA authorised lender and you can find us on the Financial Services Register. We actively undertake our own checks to help in the prevention and detection of any crime or fraud during an application for credit, and you can find out more about how it works here. For more related information, please see below:

If you feel you have been a victim of illicit finance methods, you can report this through the ActionFraud website.