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The combined volume of suspicious transaction reports in Germany, France, the U.K. and 27 other nations in Europe rose from 2019 to 2020 after a two-year decline, while new guidance and other factors pushed totals downward in 13 others, including Ukraine and Moldova.

All told, the 45 national financial intelligence units, or FIUs, in Europe that regularly, publicly disclose their reporting totals or supplied the data directly to ACAMS moneylaundering.com for analysis received almost 1.6 million STRs combined last year, a 5 percent increase from 2019.

But the overall uptick belies opposing trends across the continent, as volumes rose significantly in 17 of the 21 nations in western and northern Europe while dropping as significantly in five of the eight nations in the East.

“In terms of anti-money laundering culture and quality, Europe is heterogeneous, with stronger rules and enforcement in a few western countries than in most other nations, including Germany and in northern Europe,” Florence Mercier-Baudrier, a former supervisor with France’s primary AML regulator, the ACPR, told moneylaundering.com.

The sharpest uptick in reporting occurred in the Netherlands, where STRs more than doubled last year to reach 104,000. Reporting volumes in Lithuania, Liechtenstein and Croatia also more than doubled from 2019 to 2020, while total reports in Malta nearly doubled.

At the opposite extreme is Moldova, where volumes nosedived from more than 25,000 STRs in 2019 to only 1,000 last year after the country’s Office for Prevention and Combating of Money Laundering, or SPCML, instructed financial institutions to cease automatically flagging transactions to and from certain high-risk jurisdictions.

STR volumes also dropped by half in Ukraine, nearly a third in Switzerland, and nearly a fifth in Slovakia and Andorra.

Each of Europe’s five economic juggernauts observed increases in STRs, with reporting volumes rising more than 5 percent in Italy, roughly 20 percent in the U.K. and France, 25 percent in Germany and nearly 70 percent in Spain.

National disparities in AML rules, enforcement and suspicious activity reporting have given new urgency to the EU’s plan to create a bloc-wide AML supervisor and uniform rulebook, said Mercier-Baudrier, now a Paris-based AML consultant.

COVID and crypto

Several factors contributed to the overall increase in STRs, but most FIUs identified a rise in cyber-related fraud and other financially motivated scams during the novel coronavirus pandemic, and rising interest in cryptocurrency from consumers and regulators alike, as the primary drivers.

An urgent need for medical products and protective equipment at the beginning of the pandemic, the creation of various government loan and furlough programs to support the economy, and a seismic shift to a largely remote workforce provided ample opportunity to perpetrate financial crimes online.

Firms in Switzerland, Germany, Italy and other countries also filed a large number of STRs after the European Banking Authority, the Financial Action Task Force and several national governments published red flags and other forms of guidance to help compliance officers detect and report coronavirus-related scams.

Fully one-third of the 5,300 STRs filed last year to MROS, Switzerland’s FIU flagged payments linked to the pandemic.

MROS in turn referred twice as many cases to judicial authorities in 2020 than the agency did in 2019. In an interview with moneylaundering.com in May, the agency attributed the rise to a combination of proactive efforts by government to prevent pandemic-related scams and the relative ease with which financial institutions can detect them.

Germany’s FIU received around 11,200 COVID-related STRs from mid-March through December of last year, and 144,000 reports overall. COVID-related STRs comprised a quarter of monthly reporting volumes from April through August and significantly affected “the work of the FIU,” the agency concluded.

COVID-19 had a more limited impact in the Netherlands, where fewer than 2 percent of the 104,000 reports filed last year referenced the pandemic.

Italy logged a similar proportion: roughly 2,300 of the 113,000 reports filed to the country’s FIU last year flagged suspected fraud schemes and other crimes associated with COVID-19, but officials rated a majority of those filings as high in quality.

The phenomenon has continued into 2021, as more than 7 percent of the 35,000 STRs filed from January through August in Denmark flagged suspected COVID-19 fraud schemes and other pandemic-related financial crimes.

The increasing popularity of cryptocurrencies and the EU’s decision to subject the industry to AML regulations last year triggered more STRs in Germany, where the number of reports citing a link to the sector jumped from 760 in 2019 to 2,050 in 2020.

Estonia, a jurisdiction previously viewed as highly supportive of virtual assets services providers, or VASPs, until regulators tightened licensing requirements as part of an ongoing crackdown on the industry, logged 400 cryptocurrency-related STRs in 2019 and 530 last year after receiving only seven in 2018.

“In 2020, there were approximately three times fewer companies on the market compared to 2019, but almost three times more companies submitted reports,” the FIU disclosed in its 2020 annual report released in June 2021. “The FIU has noticed positive developments related to the sector’s compliance with reporting obligations.”

VASPs had their greatest impact in Finland, where they filed 9,000 of the country’s 62,000 total STRs in 2020 after having filed only 75 of the 66,500 submitted in 2019.

Finland’s FIU expected to receive around 70,000 STRs from cryptocurrency companies in 2021 but has already received more than 3.4 million during the first half of the year as part of a trend that the agency attributed to “retroactive notifications.”

Global scandals, global pressure

Several of the sharpest rises in STR volumes occurred in nations recently impacted by large-scale financial crimes and systemic AML failures.

Malta, still shaken by the murder of investigative journalist Daphne Caruana Galizia in 2017 and gray-listed by FATF in June, logged more than 5,100 STRs last year, nearly 18 times the amount filed in 2015. STRs in Iceland, which escaped FATF’s gray list in October of last year, saw a twelvefold increase over the same period.

In the Baltics, a region still navigating its way through a series of multiyear “laundromat” scandals and large-scale illicit finance at Danske Bank, Lithuania strengthened its laws and regulations against financial crime and saw STR totals rise sixfold from 2015 to 2020.

Investigations into Danske Bank may have also impacted reporting activity in the lender’s home country of Denmark, where STR volumes increased almost fourfold over the same period.

Same cause, same effect in Germany, where the number of STRs more than tripled since 2015 amid revelations of a massive accounting fraud at Wirecard and Deutsche Bank’s correspondent ties to Danske Bank.

“After every large scale case, there is always an uptick in reports,” said Lisa Florkowski, a former supervisor with Austria’s Financial Market Authority. “Such scandals provide specific examples of what should be considered suspicious, but also because obliged entities want to show the supervisors they are working hard.”

Narrowing suspicion

STR volumes continued rising in western Europe last year while steadily and sometimes sharply declining in the East, including in the former Soviet bloc nations of Ukraine, Poland, Slovakia, Hungary, Latvia, Montenegro, Albania and Moldova, where the FIU received fewer reports for the third year running.

FATF has repeatedly identified governments’ loose definitions of “suspicious activity” as the primary reason for high volume, low-value STRs in eastern Europe, and Moldovan officials appeared to address that criticism last year in claiming that financial institutions in the nation of 2.6 million had reoriented their reporting “from quantity to quality.”

STRs filed to the nation’s FIU dropped from 24,000 in 2019 to 700 in 2020, data obtained by moneylaundering.com shows.

In Ukraine, total STRs dropped by half after the government shifted from a numerical threshold-based reporting regime to one built on red flags and other criteria of suspicion.

“In countries highly exposed to corruption risks and organized crime, the decrease in the volume of STRs is far too strong to be linked only to a stronger focus on quality rather than quantity,” Mercier-Baudrier, the former French supervisor said. “We must also look at the political turbulence and the resources given to AML authorities, among other factors.”

Switzerland also logged a decline in STRs, but for other reasons.

In January 2020, MROS began using software that enables institutions to report multiple, related transactions in a single STR. A spokesperson for MROS estimated that if not for the reform, reporting volumes would have increased by 25 percent last year in line with those of Germany, Belgium, Ireland and the United Kingdom.

Reporting gauntlet

Thanks to the significant drop in the eastern half of Europe, the overall number of STRs filed by the 45 nations reviewed for this story declined by 14 percent from 2015 to 2020.

Excluding the eight eastern countries—namely Bulgaria, the Czech Republic, Hungary, Moldova, Poland, Romania, Slovakia and Ukraine—from the analysis paints a different picture altogether, one that shows the combined reports of the 37 remaining nations almost doubling from 750,000 to 1.4 million STRs over those five years.

The growth presents a serious challenge for Europe’s national FIUs despite their current trend towards larger staffs and embrace of new technologies for collecting, managing, analyzing and sometimes sharing STRs abroad.

Britain’s FIU, which received almost 480,000 STRs in 2019 and more than 570,000 in 2020, both tops among the 45 nations reviewed for this story, faces such a challenge even after having hired dozens of new recruits in recent years.

“One thing we need to look at is why there has been such an increase … and think about whether it’s the right amount of SARs coming in,” Graeme Biggar, director general of the U.K. National Economic Crime Center, said in June. ” We’ve put more people into the UKFIU and are putting new IT in place to enable us to manage that volume better.”

At the end of the day, however, larger reporting volumes tell an incomplete story if investigations, prosecutions and convictions of money launderers and other profit-minded criminals do not rise alongside them.

“On this, the statistics are still abysmal,” said Florkowski, now a Vienna-based consultant who also formerly led group compliance at Austria’s second largest bank. “As long as FIUs do not offer the financial sector clear feedback and actionable guidance, I see no chance for change, and the discussion about defensive reporting will go on and on.”

Greece and Belarus’s FIUs did not provide data on last year’s STR volumes by press time. Moneylaundering.com also did not obtain reporting data from the FIU of Monaco, which averages fewer than 800 STRs annually.

Contact Gabriel Vedrenne at gvedrenne@acams.org