Anti-Money Laundering Series: Using Financial Intelligence to Protect Children and Identify Suspicious Transactions

Using Financial Intelligence

Financial intelligence is an essential tool for both businesses and the public sector, especially for identifying unlawful transactions. While money-laundering and fraud-related cases are often publicised, organisations should also be aware of suspicious payments which violate child protection laws. For example in Southeast Asia, millions of child exploitation cases were reported by the UNODC from 2019-2022, with some of the highest numbers ranging from over 2.5-8 million in countries such as Vietnam, Thailand and the Philippines.

Protecting Children

The proliferation of digital media networks exposes children to greater risks than ever before, with criminals using these channels to create and disseminate exploitative media for financial gain. JFourth welcomes a recent Financial Action Task Force (FATF) report on this issue. The FATF’s analysis emphasises the detection, disruption and investigation of online child exploitation and how financial intelligence can be used to protect children from harm. By understanding the financial components of these operations, organisations can help potential victims by identifying, disrupting, and prosecuting offenders. 

Suspicious Transaction Methods

 According to the report, most illegal payments of this nature are made via transfer services operated by legitimate businesses. Common payment methods include Money or Value Transfer Services (MVTS),  online peer-to-peer (P2P) payment systems, or direct bank transfers. More obfuscated methods such as virtual asset (cryptocurrency) transfers via Virtual Asset Service Providers (VASPs) can be especially difficult to identify and trace. Virtual Private Networks (VPNs) are often used to hide incriminating online activity, while money laundering can further obscure the sources of such funds once a transaction is complete. Companies may be unaware of the risks they face or their complicity in such transactions, indicating an increasing need for awareness and financial intelligence to combat this issue.

What Responsibilities do Organisations have?

Despite having no direct involvement, businesses are responsible for preventing their services from being used for exploitation and other financial crimes. For example in the Philippines, Payment Services Providers must report suspicious activity to the Anti-Money Laundering Council, and may be investigated for involvement. Financial and reputational costs can also be severe. A 2019 case in Australia found major bank Westpac fined 1.3 billion for the non-reporting of illicit transactions, including those suspected to be linked to exploitation, to the Australian Transaction Reports and Analysis Centre (AUSTRAC). According to the Australian Broadcasting Corporation (ABC), over 250 consumers of illicit material were uncovered during the investigations, with the bank also losing a prominent client. In more recent developments, countries such as Thailand are in the process of drafting changes to legislation regarding offences against children through online media, highlighting an urgent need to protect children in today’s digital age.

How to Identify Suspicious Transactions

With so much at stake, how can businesses identify unlawful transactions, halt illegal activity, and prevent future occurrences? Further, what factors distinguish ordinary customers from criminals? In instances related to the online sexual exploitation of children (OSEC), payments by consumers take place across international borders, from developed countries to jurisdictions with higher risks of exploitation. Distinguishing similar trends can help identify criminals, along with other data points. Given the complex nature of these illegal activities, there is a need for modern businesses with digital services to consider a comprehensive money-laundering risk assessment, which covers a wide array of local and regional factors.

Alongside the expertise of qualified compliance professionals, investing in financial intelligence at individual and enterprise levels allows firms to identify these risks and create actionable solutions. At JFourth Solutions, we help businesses to fulfil their corporate, legal and social responsibilities so they can thrive in the increasingly competitive financial sector. To date, we have conducted bespoke workshops and training for a range of entities across Southeast Asia, including government agencies, financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs). Moving forward, our goal is to continue this effort – providing businesses the guidance, training, and expertise necessary to resist crime and create a safer world.

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