Online from: 1997
Subject Area: Accounting and Finance
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Article citation: Shima D. Keene, (2012) "Countering economic crime in the 21st Century", Journal of Money Laundering Control, Vol. 15 Iss: 2, pp. -
The Editorial Board has invited, over this year, a number of leading experts on aspects of financial crime to address an issue of concern to them relating to the efficacy of the various strategies that have been adopted to discourage and interdict serious financial misconduct. The first in this series of comments is by Dr Shima Keene, formerly of the UK’s Defence Academy and a leading authority on terrorist related finance.
Economic crime continues to be on the increase as criminals take advantage of rapid advancements in technology to access an ever increasing number of victims through a variety of innovative methods around the globe. The probability of falling victim to economic crime is no longer a case of “if”, but a matter of “when”. Furthermore, no individual, industry or organisation is immune from its grasp. In response, attempts to combat the problem have been somewhat ineffective and require attention.
The term “financial crime”, which is a component of economic crime, refers broadly to any non-violent crime resulting in financial loss for the victim such as fraud, tax evasion and money-laundering. The over-arching category of “economic crime” is particularly hard to define and its exact conceptualisation remains a challenge. Although there is no widely accepted definition of economic crime, it is a term generally used to refer to illegal acts in which the offender or offenders’ principal motivation is economic gain. Examples include robbery and narcotics dealing, which brings the crime into the realm of “violent” crime. It should also be noted that some crimes have multiple motives where economic gain may be a secondary objective. Alternatively, it may be a stepping stone to achieving their final objective, such as in the case of terrorism.
Regardless of the motivation or the objective of the different types of economic crimes committed, its often complex nature frequently involves a web of individuals that enable the crimes to occur. Part of this network consist of individuals, frequently “insiders” who participate either through their inactivity by turning a blind eye to the problem, or by actively participating for profit. The insider threat is a particularly unsavoury concept that many organisations are reluctant to embrace.
One concern is that the private sector, when falling victim to economic crime, is often too eager to write off its loss. This is partly because the cost of enhancing their security against the risk may not be perceived as being commercially viable. However, one challenge is that sometimes the full cost of the crimes committed is unknown. As such, it is often difficult to make an appropriate assessment as to the level of security expenditure that may be worthwhile. This is particularly true when attempting to measure damage in relation to intangible assets such as reputation. It must be remembered that economic crime may cause serious reputational damage to organisations, impacting its market share. Furthermore, at a macro level, the reputational damage may become such that it is capable of damaging whole economies by driving away investment if that jurisdiction is deemed to be taking inadequate measures to counter the threat.
In response to tackling economic crime, a number of initiatives have been developed and adopted across the globe including the adoption or updating of relevant legislation and regulation. However, despite the undisputed importance of such measures, the fact that the current environment continues to favour the criminal brings into question the extent of the efficacy of such interventions in tackling the threat. The key is in understanding the limitations of such measures and developing an appreciation of other forms of interventions.
Unfortunately the counter economic crime efforts to date have been generally disappointing. They can be characterised as disjointed efforts driven by a rather simplistic adoption of the problem, coupled with an over-emphasis on disruption, targeting merely the low hanging fruit. In addition, the unwillingness to explore outside organisational comfort zones, both physically and intellectually, has led to an approach that can only be described as a self certifying prophecy. This is particularly relevant in the international context as the financial activity under scrutiny is global in nature. As such, the lack of appreciation of local market conditions and the global economic network, coupled with the direct application of Western practices are more often than not, inappropriate in other cultures and have, and will continue to be counter productive at a number of levels.
The reality is that the existing fragmented silo mentality is no longer appropriate. For any real impact to be felt, existing knowledge gaps must be bridged through the amalgamation of the existing knowledge base in addition to bringing new knowledge in an attempt to further to unite stakeholders. This in turn aims to provide new thinking and direction, both strategically and tactically, in order that those involved in tackling economic crime is better equipped to deal with the day-to–day task of countering not only economic crime, but the broader criminal environment.
What this new strategy will require, however, is a very different approach and the willingness to embrace change in order to reposition itself in a more appropriate stance against its enemies. Furthermore, achieving such a strategy will undoubtedly require the restructuring of organisations, forces, and doctrines, and perhaps most importantly, a restructuring of “mind set” in order to address the changing nature of the threats that are most likely to challenge those powers in the asymmetric security environment in the 21st century.
Shima D. Keene