In October 2009 the Financial Action Task Force (“FATF”) published a report entitled “Money laundering and terrorist financing in the securities sector”. The purpose of the report is to identify the vulnerabilities in the sector and to raise awareness of these vulnerabilities.
The securities sector is one of the core sectors through which individuals and entities can access the financial markets. The sector is characterised by complex products, rapid electronic transactions and global reach. The FATF qualifies these features as attractive for criminals. In this light the FATF considers it remarkable that the level of reports of suspicious transactions in the securities sector is relatively low compared to other industries, such as banking.
The report shows how criminals can abuse securities firms for money laundering purposes and how illicit funds can be generated through fraudulent activities. The report further identifies specific risks based on different types of products, intermediaries, clients, markets, payment methods and distribution channels.
The FATF concludes that more liaising and cooperation between law enforcement, regulators, supervisory bodies and the industry is needed on this topic to increase awareness of the vulnerabilities and the number of reports of suspicious transactions in this sector.