Shedding Light On The Dark – The Dark Money Conference 2021

Dark money is an intimidating term. When political spending influences the decision of a voter, it starts a chain of events that have very real and very extensive consequences to society, whether they are aware of it or not. Hosted by Graham Barrow and Ray Blake from the Dark Money Files, the Dark Money Conference of 2021 shed some extremely fascinating insights on this seemingly hidden world, the problems it poses and how Fintech can be seen as the saviour against such dangers. Across the 3 days, here are some of the biggest talking points that we think you should know about.

Day 1, How Fincrime Hurts Us All – The conference began with our hosts and Charlie Delingpole, CEO of ComplyAdvantage, discussing the pervasive effects of financial crime. Barrow accurately summated that problems arise because ‘people who should have access do not and people who shouldn’t have access do.’ This unequal admission to data fuels problems that, to Delingpole, are often intimately linked to more problems. For instance, credit defaults might be linked to fraudulent activities because money may have been illegally stolen, but the purpose of stealing that money could be to enable cases of sex trafficking. Paul Radu, co-founder and chief of innovation at OCCRP, explained that ‘social crime and social effects are facilitated by financial crime’, and so Fincrime integrates all of these ideology and entity based risks. It’s worrying and increasingly clear that money can buy the silence of politicians and pave the road for corruption to ensue.

Daphne Caruana Galizia – To give an example of the ultimate cost of such corruption was Matthew Caruana Galizia’s powerful talk about the 2017 assassination of his mother, Daphne Caruana Galizia. Daphne Caruana Galizia was a remarkable investigative journalist, instrumental in exposing government corruption involving Malta and Azerbaijan. In watching his mother’s socially progressive work, Matthew was inspired to undertake a similar role, landing a job at the International Consortium of Investigative Journalists. This platform had the objective of making information accessible on a global scale, but in reality, it exposed Matthew to a key revelation emerged; the world works through underground rivers of money that most people will never see, where money laundering through off shore companies, tax evasion, and murder, are commonplace. 

By 2015, both Matthew and Daphne Caruana Galizia were digging the same tunnel on opposite sides of the world; whilst Daphne Caruana Galizia began uncovering the corruption in Malta through financial deals with Azerbaijan, Matthew’s observation of the Panama Papers led him to find that 2 of Malta’s most senior officials illegally awarded billions of dollars to private companies set up in Panama just 5 days after being elected into office. Sadly, Daphne Caruana Galizia was assassinated before revealing her findings. Further investigations led the police to arrest Yorgen Fenech, who Daphne was so close to exposing for his governmental bribery and corruption. That personal, human loss can never be recovered. Matthew elaborated that ‘the damage they [corrupted officials involved in Fincrime] are doing is not quantifiable, it’s too enormous to imagine.’ Because of this, public confidence in Maltese authorities is extremely low. It took the Galizia family two whole years fighting for a public inquiry, but the Maltese Prime Minister refused. Only after pressure from the Council of Europe was the investigation furthered, highlighting the PM”s involvement in the conspiracy, shocking the Galizia family, the public at large and emphasising the extensive nature of the corruption.

Can we all help fight against this? Yes. Matthew and Jonathan Price, barrister and privacy law specialist, were keen to stress that ‘there needs to be a global approach to tearing down walls of financial secrecy.’ It took the Galizia family an entire global investigation to uncover the reality of one case of corruption, but this should not have been the situation in the first place. Price voiced that rich individuals can bully their way into their goals, not just money laundering but reputation laundering, as they acquire enormous political capital they do not deserve. To combat this, there needs to be more corporate transparency. This is potentially achievable through technological advancements, such as Blockchain technology that focuses on how data and contracts are registered in a way that makes it difficult to tamper with the authenticity and are made public by default. Beyond that, governments need to recover taxes that are not being paid, or recover money from people who are evading tax, as it is this drain on the economy that is facilitating organised crime.   

Day 2, Using Tech To Fight Fincrime – As time goes on, people are less tolerant of evil. Whether that’s manifested in racial inequality or environmental crimes, regulation is constantly being expanded to protect the vulnerable. But how can Fintech be the moral and economic guardian of the future?

Although discussed on the opening day of the talk, Delingpole highlighted the basic framework being employed at ComplyAdvantage to help tackle Fincrime. Spending $2.5 million a month on engineering and 25 squads of 10 people to build new compliance products shows the importance of research and development. All of this funding is being poured into the launch of corporate databases, where data is being ingested so that models can create insights which reduce risk. This involves implementing AI based rules and machine learning based transaction monitoring,  which automatically connect entity based risk with transaction based risk in a much more efficient way. 

But as the technology of the defence strengthens, so too does that of the attackers. This can be demoralising when millions of dollars are required just to keep level with criminals. It turns the conflict into somewhat of an arms race. Who will win, us or the fraudsters? The supply chain of criminals becomes more and more integrated everyday, where multiple providers sell and share sensitive data on the dark web and indulge in crypto fraud. They collaborate on destruction together. What this shows is that ‘if you want to play in this global market where attackers come from all over the world, you need to invest’, since relying on status-quo technology and infrastructure is too slow of a response. 

Colom Lyons of ID Pal expanded on this, noting that it is the people employing the technology that can affect change. Lyons encourages companies to stop building inhouse solutions to Fincrime threats, but instead seek expert external solutions for advice. Not only will these companies specialise in the technology, but they will have also worked with different companies, on different journeys, in different sectors in the fight against Fincrime. This develops their holistic understanding of the threat at hand, and means that somebody else’s past experience can actually protect your future. Equally so, third party companies have to bridge the gap between the tech heads and the C Suite people by clearly, simplistically showcasing the technology in use. This establishes trust, confidence, and momentum for the future. 

The Future Of Asset Recovery – People say crime doesn’t pay, but financial crime really does pay, shown in Aidan Larkin’s excellent keynote. Out of the $300 billion lost due to financial crimes in the US, only $4 billion was recovered. Out of the €110 billion lost in the EU, only €1 billion recovered. These are the statistics in areas with well funded law enforcement operational budgets, and yet 100’s of billions of dollars are not recovered. In developing economies, the situation is worse, so much so that the entire ecosystem is clearly underperforming to a dangerously low standard. 

Larkin highlighted the awful double standard that is at play with asset recovery. If a normal individual is made bankrupt today in the UK, a trustee is made responsible for managing their assets so that they are effectively dissipated to cover costs, regardless of circumstance. However, the automatic vesting of criminal assets is not the same. A convicted criminal that owes the UK, hypothetically, £15 million is allowed ‘peaceful enjoyment of property’ and are able to realise their assets in a manner they see fit. This means criminals still have capital available to reinvest into financial crime schemes. In order to change this, Larkin believes that the roadmap can be seen in cryptocurrency. The IRS, responsible for taxation in the US, perfectly demonstrates why. Jarod Koopman, director of IRS cybercrime unit, said that ‘in fiscal year 2019, we had about $700,000 worth in crypto seizures … so far in 2021 we’re at $1.2 billion.’ It is extremely clear we need to warmly welcome these new technologies into law enforcement to get these sorts of results. Imagine the possibilities if we understood what is driving the ability to recover billions of dollars into crypto seizures, so early on in the crypto lifespan, and apply that to the aged asset recovery sectors. Larkin believes we need to encourage public and private sector collaboration and that governments need to be confident in saying ‘we don’t have the skills, so we are getting an expert private MNC to help us.’ Ultimately, asset recovery will only improve when this cultural change begins.

Day 3, Joining The Data Dots – The final day of the conference began with the topic of data transparency and availability, led by Rebecca Lee, Chief Impact Officer at OpenCorporates. OpenCorporates are the largest open database of companies and company data in the world. Data for over 199 million companies has been made available and transparent across various jurisdictions by OpenCorporates, and has allowed people to directly identify illicit financial activity. This was particularly utilised during the pandemic to identify covid related fraud, exemplified by the US Government Payment Protection Programme. The programme’s objective was to help low-level businesses survive through providing loans to keep them afloat and cover costs. To qualify, a business had to be in registration from the 15th February. What was found was that a tremendous amount of money was awarded to companies after this date. In total, the SBA approved nearly $1.1 billion to potentially ineligible applicants with EIN registration dates beyond February. $1.1 billion. And when you look at where certain sects of this money went, some businesses were receiving loans for owners who had convicted fraud convictions, and several millions of dollars were given repeatedly to the same individuals. It’s clear that people benefited from the programme and were able to do so by hiding their data and, thus, their true intentions. This is why the data dots must be joined; Lee was clear in stating that ‘we need to raise the floor of the access of company data for everyone.’

The Missing Cryptoqueen – The day then progressed onto a talk led by Jamie Barlett, author and journalist, about the disappearance of Dr Ruja Ignatova, the founder of the cryptocurrency, OneCoin who persuaded millions to join her financial revolution. Dr Ruja had illegally managed to create a hugely profiteering ponzi scheme masquerading as a cryptocurrency, disappearing before any charges could be faced. Approximately $4 billion was stolen by Dr Ruja worldwide, but for Barlett, who was knowledgeable about the space of cryptocurrency, it was almost unbelievable that such a hidden coin was generating such traction. This was demonstrated when Barlett went to visit a small 10 person village in Uganda, remote from the metropolitan world, and yet the villagers knew of OneCoin so trustingly that they had committed their life savings to it. There’s a strong element of FOMO regarding financial freedom that drives this irrational decision making in people; scam artists thrive off of this feeling, and Barlett was strong to convey the need for the average individual to be greater informed about the basics of blockchain and crypto technology in order to protect themselves.

Conclusion – The Dark Money Conference, with its multiple keynote speakers and fascinating insights from industry leaders, seemed to have one unifying message for the Fintech world; let’s work together. From Matthew Caruana Galizia’s moving opening talk, to Aidan Larkin’s scrutiny of asset recovery and ending on the fraudulent disappearance of Dr Ruja Ignatova, a key contextual problem was always the lack of cooperation, collaboration and transparency that financial companies had with each other. The cost; billions of dollars stolen, public trust in jeopardy and, in its most extreme cases, death of a loved one. Hopefully then, if more companies commit to publicizing open data, utilising expert third party solutions and forming a genuine, collaborative effort against Fincrime, justice in all forms will prevail.