Yesterday, the National Crime Agency (NCA) released its latest National Strategic Assessment (NSA), providing a comprehensive analysis of the current state of serious and organised crime in the UK.
This year’s report highlights a growing threat from drug-related crimes, with the increasing production of cocaine, the rise of synthetic drugs, and the dangerous use of substances like nitazenes leading to escalating fatalities.
The NSA also points to a broader rise in serious crimes, including cybercrime, child exploitation, and fraud, despite overall crime rates declining over the past decade. The NCA’s work in tackling these issues is critical, but the report warns that the UK faces greater risks than ever before as technology and global criminal networks continue to evolve.
“The changing threat, rapidly evolving technology, and the global context mean that our mission to protect the public is more challenging than ten years ago.”
Graeme Biggar CBE, NCA Director General
The ever-present threat of fraud
Fraud poses a significant and growing threat to UK society, affecting both individuals and businesses. Notably, the NSA estimates that 11% of fraud victims in England and Wales were targeted more than once in the year ending March 2023. Fraud is now the most reported crime, comprising 37% of all reported crimes against individuals. However, only 13% of these incidents are reported to Action Fraud, with under-reporting by businesses likely even higher due to reputational risks and potential bad PR.
The UK has seen a surge in cyber-enabled fraud, which now accounts for 89% of reported cases. Criminals exploit technological advancements, including generative AI tools like ChatGPT, to enhance the scale and sophistication of their fraud operations. The rising use of social engineering, data breaches, and complex laundering networks involving money mules further complicates the landscape. Between July 2022 and June 2023, there were 3.2 million fraud incidents in England and Wales alone, emphasising the widespread nature of this threat.
“While overall crime figures have fallen over the last decade, the scale of and harm from serious and organised crime (SOC) has increased, with SOC offending consequently making up a significantly higher proportion of all offending.”
Graeme Biggar CBE, NCA Director General
While countermeasures have been effective, criminals continually adapt, posing an ongoing challenge for AML compliance teams. The economic pressures and advancements in technology, particularly AI, are likely to expand both the number of potential victims and the capabilities of fraudsters, making it crucial for compliance teams to stay ahead of these evolving threats.
For AML compliance teams, the growing sophistication of cyber-enabled fraud and the rise of AI-driven scams necessitate enhanced detection and prevention strategies. The significant under-reporting of fraud, particularly by businesses, reinforces the need for a stronger culture of transparency and reporting.
Compliance teams must also focus on monitoring money laundering activities, red flags, and risk factors, especially those involving suspected money mules, and engage more closely with law enforcement and industry partners to keep pace with evolving criminal tactics. Adapting to these changes is crucial to mitigating emerging risks.
Record-breaking levels of illicit finance
Serious and organised crime in the UK creates enormous profits, with research estimating that over £12 billion in criminal cash is generated in the UK each year, and more than £100 billion laundered through UK structures annually.
Naturally, money laundering is a major concern, as it is often a vehicle for further criminal activity, damaging financial markets, and undermining legitimate businesses. This criminal activity can often result in financial hardship for businesses, inflated property prices due to the introduction of illicit funds, and significant tax losses for the government. Additionally, the need to combat money laundering diverts resources from public and private sector services.
What’s more, the rise of crypto assets presents new challenges for AML compliance teams, as these digital currencies are increasingly used to launder proceeds from both cyber and non-digital crimes.
Criminals have also innovated within traditional money laundering methods, exploiting weaknesses in UK corporate structures, such as the registration of multiple companies at single residential addresses and the use of dormant companies. Offshore corporate entities and trusts are frequently used to layer and place assets, making it difficult for AML teams to trace the origins of illicit funds. The Economic Crime and Corporate Transparency Act aims to address these vulnerabilities, but compliance teams must remain vigilant in monitoring corporate misuse.
Money mules continue to play a significant role in laundering criminal proceeds, particularly from organised fraud activities. AML teams need to enhance their monitoring systems to detect and prevent the recruitment and use of money mules. The involvement of ‘professional enablers’ (individuals or businesses that provide services to enable crime) – who operate across various sectors such as banking, accountancy, real estate, and legal services – further complicates the landscape, requiring close scrutiny of these sectors to prevent the facilitation of money laundering.
The National Crime Agency’s latest National Strategic Assessment is a stark reminder of the troubling escalation in serious and organised crime, with significant implications for AML compliance.
It is clear that AML frameworks must adapt to address evolving risks. Financial institutions and businesses need to enhance their vigilance, refine their risk assessments, and bolster their compliance strategies to effectively combat these threats.
Staying ahead of these challenges will require a proactive approach to AML, incorporating the latest insights and trends revealed by the NCA. By aligning AML practices with the current threat landscape, organisations can better protect themselves and contribute to a safer, more secure financial environment.
