On June 5, 2020, Europol started the new European Financial and Economic Crime Center (EFECC). The European Union Anti-money Laundering Action Report mentioned the start of the EFECC, partly in response to the various anti-money laundering scandals in the European Union (e.g., Danske Bank and Swedbank).
EFECC’s Goals and Operation
The EFECC will work within the current organization structure of Europol, which are already quite active and playing important roles in the EU response to financial and economic crime. It will be staffed with 65 international experts and analysts.
The Europol press release explains that money laundering and criminal finances serve as the engines of organized crime. Without them criminals cannot utilize the illicit profits they generate with the various serious and organized crime activities they conduct in the EU. Europol has reported that 98.9% of estimated criminal profits remain with criminals.
The COVID-19 pandemic in Europe has illustrated that criminals are quick to adapt their criminal schemes to changing conditions to take advantage of fears and vulnerabilities. Criminals are targeting economic stimuli proposed in the wake of the COVID-19 pandemic to defraud public funding. Law enforcement authorities must be able to follow the money trail as a regular part of their criminal investigations and seize criminal profits in order to effectively disrupt and deter criminals involved in serious organized crime.
According to Tim Adams, President and CEO of the Institute of International Finance, the industry has called for an intelligence-led approach to financial crime, and meaningful initiatives like EFECC are essential to improving outcomes.
Europol Strategic Report
On June 5, 2020, Europol published a strategic report . It gives an overview of the most menacing phenomena in the area of economic and financial crime, including various types of fraud, the production and distribution of counterfeit goods, money laundering, and others.
Missing trader intra-community (MTIC) fraud is the most commonly encountered type of value added tax (VAT) fraud in the EU. MTIC fraudsters often target countries with high VAT rates. Based on studies and cases supported at the EU level, Europol estimates between €40 to € 60 billion are lost each year to MTIC fraud schemes in the EU.
An increased risk of financial crime is that 58% of customers banking in the EU now regularly employ digital online solutions such as websites or applications to conduct transactions. Mobile banking alone had increased by 50% by the end of 2019. These banking methods, albeit convenient, present risks. Customers often lack technical knowledge and experience. As a result, they are vulnerable to attacks by cybercriminals using phishing techniques and malware solutions in order to access online accounts.
Increasing digitalization and less direct interaction with customers can also weaken Know Your Customer procedures. Weakened KYC procedures make financial services more vulnerable to use for various criminal activities, including online banking fraud.
The start of the EFECC will increase financial intelligence for the EU and enable it to trace and seize money more often as well as uncover and investigate money laundering and financial crime schemes.
One thing to watch will be the interaction of EFECC with national law enforcement authorities, especially prosecutors.
The current issue of the IELR will have a more comprehensive story on the start of the EFECC and the strategic report behind its start.