Lagging or Leading?: Deconstructing Eastern Europe’s Efforts to Combat Financial Crime

Forensic & Litigation Consulting | Financial Services

August 24, 2020

Tetris

In a world where technology continues to develop at a fast pace, connecting countries and promoting the growth of markets and economies, networks of criminals looking to exploit this global interdependence are becoming increasingly sophisticated and harder to prevent.

The international infrastructure currently designed to prevent money laundering (ML) and terrorist financing (TF) is overwhelmed by the scale of the problem, including in jurisdictions across Europe. The United Nations Office on Drugs and Crime (UNODC) estimates that between $800 billion and $2 trillion (roughly 2-5% of global GDP) is laundered each year.

Of illicit funds generated in Europe, governments manage to seize only 1.1% of criminal proceeds annually, or about EUR 1.2 billion, according to Europol. Centrally problematic to Europe’s challenges is the lack of a harmonised approach to regulatory investigation, supervision and enforcement, which is exacerbated by limited resources and inadequate political prioritisation.

Within this landscape, it is no secret that Eastern Europe is often singled out as a key corridor for the proceeds of crime to transit the continent. Massive volumes of illicit funds, from the Baltic money laundering schemes ($500 billion) to the Russian Laundromat ($20 billion), have come to light in recent years and exposed the region to the extent of the problem.

But is it really the case that Eastern Europe lags behind other jurisdictions in preventing financial crime? The crux of concerns identified by numerous international bodies—including the European Central Bank and Moneyval—are shortcomings in the implementation of regulatory controls across the region, including in Hungary, Poland, Romania and Slovenia.


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