Financial Crime Prevention Basics

Financial crime prevention shows up off often in financial news but can mean a variety of things as it covers several complex issues. In this article you will find several basic concepts of financial crime which will help one familiarise themselves with the broader issues a bit easier. 

Financial Crime what is it?

The term Financial Crime (FinCrime), in its most general definition, refers to any illegal activity involving financial services, instruments and institutions. It is a very broad term used to describe  the proceeds from criminal activities. As such, financial crimes come in many different forms.

The most common types of Financial Crime

Corruption and Bribery refers to actions involving the abuse of power or position for personal gain, as well as  the acceptance of any kind of benefit in exchange for preferential treatments/favours (for example: A company bribing public officials to secure a lucrative deal).
Fraud refers to activities involving the use of deception to acquire financial or personal gains (for example: insurance or investment scams).
Money laundering refers to the act of disguising an illicit source of funds so they can be perceived and used as legitimate earnings.
Tax evasion refers to  the act of unlawfully understating or failing to pay applicable taxes (for example: claiming false deductions or failing to report true income).
Terrorist financing refers to activities  involving transfers of  funds to support terrorist organization and their activities. Unlike money laundering, these funds can come from perfectly legitimate sources.

Why prevention of Financial Crime is important?

Financial Crimes are often committed by organizations and individuals that look to profit from illegal activities both big and small. This can range from identity theft and embezzlement to Drug and Human trafficking. As a result, they have real consequences for individuals and communities alike, resulting in economic instability, personal loss, a decline in trust in the law and public institutions, and an incalculable human cost. As long as these crimes are profitable, they will continue to be committed, which is why it is so important to disrupt the flow of these revenues.

Preventing Financial Crime

Due to its impact, the international finance community makes preventing financial crime a priority. There are a number of international institutions,  such as the Egmont Group of Financial Intelligence Units or the Financial Action Task Force (FATF) cooperating with financial institutions, regulators, law enforcement agencies and governments. They collect and analyze data related to financial crime to establish effective rules and controls used to detect and prevent financial crime. These are published and enforced throughout the financial sector. As a result, for example, every financial institution must have an Anti-Money Laundering (AML) policy and Know Your Customer (KYC) process in place. Financial institutions maintain entire departments that focus exclusively on one type of financial crime, such as anti-money laundering, terrorist financing or prevention of bribery and corruption (ABC), to effectively combat them. The prevention of financial crime requires constant adaptation, as technological developments, and the ways in which we manage our finances evolve, so do the methods that some use to abuse them. 


Financial Crime is a multi-layered and constantly evolving issue with a widespread impact on society. It requires the attention of many institutions worldwide to make it harder to profit from criminal activities.


Author: Tomasz Michnowski
Graphics: Canva

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