Illicit finance, which involves money derived from illegal activities or used for illegal purposes, is a pressing global issue with far-reaching consequences. It undermines economic growth, exacerbates poverty, and fuels instability and conflict in both developed and developing countries. Consequently, policymakers and multilateral institutions are devoting increased attention to this matter. Specifically, the UK International Development Strategy and the expenditures from the UK Overseas Development Aid and Integrated Security Fund (ISF) demonstrate a concerted effort towards addressing this issue.
Recent events have emphasized the need for a united global effort and bilateral partnerships to jointly tackle illicit finance threats impacting the UK. Geopolitical issues have also raised attention to the use of financial sanctions as a political tool and form of intervention. For example, the UK and the EU’s sanctions and export controls on Russia and Belarus have highlighted the necessity for well-functioning anti-money laundering (AML) systems and relevant reforms.
To tackle these challenges, Deloitte has developed an “Ecosystem Analysis” that assists jurisdictions in transforming their broader illicit finance regimes. This approach involves identifying and illustrating all the organizations involved in tackling illicit finance within a national system, and understanding the interactions between these organizations to identify system-wide enhancements. The goal is to deliver targeted, effective reforms that can make a tangible difference in combating illicit finance and promoting economic development.
The Ecosystem Analysis has been utilized to support governments in understanding the policy, coordination, and legislative reform needed, as demonstrated in Deloitte’s work with HMG’s Serious and Organised Crime Network (SOCnet). The analysis has also been used to support other UK government departments and jurisdictions in analyzing their broader AML system, helping stakeholders to simplify and digest a complex landscape.
A positive evaluation by the Financial Action Task Force (FATF) is crucial for developing countries as it enhances their reputation, facilitates access to international financial systems, and encourages international cooperation and support. As countries prepare for the 5th round FATF mutual evaluations, conducting an Ecosystem Analysis can proactively help them understand system-wide gaps and develop targeted reforms that demonstrate effectiveness.
In conclusion, conducting an Ecosystem Analysis allows jurisdictions to cultivate a system-wide approach to deter and disrupt illicit financial flows. This approach enables governments, donors, and multilateral institutions to deliver targeted interventions, demonstrate effectiveness to bodies such as the FATF, and keep themselves accountable for implementing impactful reforms.
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Simran is a Senior Consultant within Monitor Deloitte, Deloitte’s Strategy Consulting practice, and Jonathan is Deloitte’s UK lead for our global foreign policy and international affairs practice. Their expertise lies in the areas of sanctions, illicit finance, and international affairs & diplomacy.
References:
1. Transparency International
2. IMF
3. UK FCDO
4. UK Integrated Review of Security, Defence, Development and Foreign Policy
5. Reuters