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Will faster international digital payments increase money laundering and sanctions evasion risks?

Author: Syedur Rahman  8 January 2024
2 min read

Syedur Rahman details concerns that speedier cross-border payments could hamper enforcement of sanctions and aid financial crime

A drive by the G20 to make international payments quicker has led to warnings that this may hinder the enforcement of sanctions against Russia and other states.

The G20 - an intergovernmental forum made up of 19 states, the European Union and the African Union – wants digital payment systems to be made more efficient by 2027. But concerns have been raised that the G20’s plans do not take into account such systems’ vulnerability to the heightened money laundering risks posed by the increase in war-related sanctions or to other financial crime.

The Future of Financial Intelligence Sharing (FFIS), a UK-based research programme, has said that those looking to reform the payments systems have not properly considered fraud prevention and financial crime security.

In a recently-published report, the FFIS urges increased public and private sector collaboration to ensure financial crime prevention systems are embedded in the cross-border payment network infrastructure and to maximise the use of national data to spot money laundering networks. A failure to do this could, according to the FFIS, have a negative impact on national security in terms of sanctions implementation. It may also create a risk to consumer financial safety and reduce the effectiveness of law enforcement when it comes to tackling organised crime.

The Financial Stability Board (FSB), which is an international body that makes recommendations about the global financial system, developed a road map plan for improving cross-border payments by 2027, when the value of such payments is expected to reach $250 trillion a year.

This G20-led initiative also has the support of the World Bank, the IMF and approximately 40 central banks. But the FFIS believes that plans to process cross-border payments within seconds will reduce the chance to apply compliance checks and block suspicious payments by those looking to evade sanctions.

Other commentators have also voiced concerns that the G20 plan does not address the need to enforce sanctions by blocking transactions in real time – a requirement of most US sanctions programmes. Such concerns are particularly relevant given the huge increase in sanctions imposed since Russia’s full-scale invasion of Ukraine almost two years ago.

The FFIS is quite clearly questioning the adequacy of the G20's plans. It is asserting that a balance between expeditious payments and robust financial security measures must be maintained to address the evolving challenges of financial crime and sanctions evasion.

But whether the FFIS is right to criticise the G20 plans will largely depend on the effectiveness of the precise safeguards that are proposed and eventually introduced. And none of the parties involved will be in favour of running risks simply to reach the intended goal of faster international payments.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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