Law in the Time of COVID-19

The University of Vale do Itajaí (Univali) recently hosted an international seminar cycle titled "Law in the Time of COVID-19," running from April to June. The lecture series, conducted entirely online, is part of a joint initiative of the Graduate Program of Univali and the University of Perugia, University of Alicante, University of Minho, University of Caldas and Delaware Law School and is intended to foster academic cooperation and international exchange.

On May 27, I had the distinct opportunity to join the former Minister of Justice and Public Security of Brazil and former federal judge, Sergio Moro, in a joint lecture moderated by Professor Marcelo Buzaglo Dantas, from the Post-Graduate Program in Legal Science at Univali. Comprising the fifth lecture of the series, the focus was on money laundering and corruption. Conducted entirely in English with subtitles in Portuguese, the presentation, which was open to the public, drew over 500 attendees. Below are a few highlights from the discussion.

  • In addition the tragic health crisis, one of the significant side-effects of the COVID-19 pandemic has been the tremendous impact it has had on the global economy.

  • The financial fallout and the high unemployment rates that we're currently seeing are conditions historically associated with increased crime, as well as increased corruption.

  • Intuitively (although perhaps not morally), it makes sense that during desperate times, there will be people who resort to theft and fraud, and that crime and corruption will be more prevalent.

  • But unlike in past economic downturns and times of crisis, our current situation presents some new and unique circumstances and challenges.

  • Roughly half of the world is in some sort of lockdown or has restricted mobility, international border crossings are closed, and many "non-essential" businesses aren't operating.

  • These restrictions have resulted in a disruption to global trade and supply chains.

  • This is also significant because supply chains are notoriously subject to corruption.

  • The travel restrictions aimed at stemming the spread of the coronavirus have disrupted legitimate trade as well as illicit trade.

  • There is another unique aspect of our current situation. For the first time in history, an overwhelmingly large part of the population is suddenly working and schooling remotely.

  • This has opened up a vast online network for various types of “cyber-opportunists” who are now taking advantage and capitalizing on this situation.

  • Criminals are exploiting old as well as new vulnerabilities that have opened up as a result of COVID-19. This includes vulnerabilities in online networks, supply chains, internal controls at financial institutions, and others.

  • The pandemic has had an impact not only on the commission of crime, but also on the types of crimes that are committed. Consequently, there is a notable uptick in crimes that are reflective of these unique circumstances.

  • It has also created numerous opportunities for illegal profit as well as incentives to take advantage of these opportunities.

  • There is a strain on government, a strain on businesses, a strain on access to specific resources, individuals are highly distracted, and in some cases there is even a reduced ability of law enforcement authorities to control illegal activities, some of which are emerging for the very first time.

  • This type of environment creates a situation that in many respects presents a perfect storm for corruption and illicit financial flows.

  • Major financial institutions have reported seeing spikes in fraud attempts over the past few months, as well as significant changes in customer behavior and transactions due to an increase in online activity.

  • Various law enforcement agencies (e.g. INTERPOL, DOJ) as well as money laundering watchdogs and financial standard setting organizations (e.g. FinCEN, FATF, UNODC) have issued advisories and guidance intended to draw attention to and increase awareness of the emerging risks and threats to financial institutions and their customers.

  • A lot of this guidance has centered around cybercrime and the increase in fraud activity. Also noted however was the role of money laundering as a critical enabler of COVID-19-related organized crime.

  • Although the global pandemic is expected to have wide-reaching and long-lasting social and economic effects, there is still much that is unknown and remains to be seen.

  • Unfortunately, we’re still likely to see new schemes and risks continue to emerge, including those posed by sophisticated global criminal networks.

  • However, it is clear that criminals are adapting their crimes to exploit the pandemic and have quickly seized opportunities to generate significant amounts of profit.

  • Financial institutions in particular need to remain vigilant and maintain a strong compliance presence.

  • Money that has been lost to corruption and crime is money that would be better spent on lifesaving measures and in aiding countries and governments move forward in this global crisis.

  • Awareness of the issues and proactive efforts are needed to stem illicit financial flows and perhaps even to save lives. This may be even more important now during the current crisis than ever before.

A huge thank you to Professor Marcelo Buzaglo Dantas and his staff for organizing this event.

A recording of the presentation is available on YouTube here.

#COVID19 #moneylaundering #fraud #corruption #cybercrime #financialcrime #riskmanagement

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