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Financial crime in Sub-Saharan Africa

Phil Cotter
Phil Cotter
Group Head, Customer & Third Party Risk Solutions, Data & Analytics, Refinitiv

As financial criminals around the world employ ever more sophisticated techniques, and regulators increasingly push back, how are compliance practitioners in Sub-Saharan Africa (SSA) managing the growing pressure? A Refinitiv survey reveals significant challenges facing compliance professionals in Sub-Saharan Africa and the remedial steps they are taking through the adoption of new technology.

  1. A Refinitiv survey has tracked financial crime trends in SSA, including the standards and attitudes around compliance and the approach to data and new technology.
  2. To combat financial crime, compliance officers are investing heavily in more sophisticated technology, with 90 percent expecting significant change to their technology over the next two years, and are gleaning more information from the data that this technology provides them. However, there are weaknesses.
  3. The survey reveals that compliance practitioners in SSA are embracing digital identity. Meanwhile, there is also a high uptake for compliance programs focusing on anti-money laundering (73 percent), and anti-bribery and corruption (70 percent).

The risk posed by financial crime in Sub-Saharan Africa is one that the region’s compliance professionals are acutely aware of. Two-thirds of respondents to Refinitiv’s first financial crime in SSA survey reported that their organization had been the victim of some type of financial crime over the past five years.

The risk of financial crime has been a priority long before compliance became such a business-critical task. However, in a climate where new and multifarious risks appear almost daily, the Refinitiv survey particularly concentrated on how SSA-based compliance practitioners are managing the increased focus and pressure on their function.

Download the report: Fighting Financial Crime In Sub-Saharan Africa 2020

The impact of COVID-19

Such issues have become even more important during this time of the COVID-19 pandemic. Many businesses around the world have gone into crisis mode, and a great number have raced to increase their online presence as quickly as possible.

During such turbulence, it is easy to overlook certain security issues. However, it is especially important to act cautiously in the midst of a crisis.

COVID-19 Phil Cotter Quote

Rapidly evolving global regulation has forced criminals to innovate, and seek new avenues to move illicit cash around the world. Accordingly, they will be actively searching for weaknesses in the global system.

Countries that are perceived to have a weak rule of law, or to appear to be far removed from the scrutiny of global authorities, are potential targets. Now is therefore not the time to overlook policy requirements.

The growth of compliance obligations

For many, such stringent regulatory compliance obligations will be new.

For so long the forgotten continent, indications of deepening economic integration continue to grow.

The African Union, formed in 2002, has created a power bloc of 55 countries and comprises more than one billion people. In 2011, one of the continent’s leading economies, South Africa, entered into a relationship with the BRIC countries — Brazil, Russia, India and China — opening access to many other African economies.

More recently, the formation of the African Continental Free Trade Area in 2018 has created the largest free trade area in the world in terms of participating countries, and is estimated to represent a market of 1.2 billion people.

This intensifying integration offers many exciting opportunities for ambitious organizations, but for compliance officers, the workload and pressure build exponentially.

66% of respondents have experienced financial crime in the past five years. Financial crime in Sub-Saharan Africa

Investment in technology

Every opportunity represents risk, and to pursue these opportunities to fight financial crime in Sub-Saharan Africa will require a robust response and alignment with the standards of the international financial system. Failure to do so risks the very real possibility of financial exclusion.

To ease this growing pressure, SSA-based compliance professionals are investing in increasingly sophisticated technology and are demanding more from their data to help them uncover risk.

Refinitiv’s survey of SSA-based compliance professionals revealed that:

  • 90 percent expect their financial crime prevention technology to develop over the next two years.
  • 62 percent said better data management and analytical capabilities is the main reason they would invest in a technology upgrade.
  • 66 percent have embraced innovative technology to help them meet their compliance obligations.

Better data management and analytical capabilities

Digital identity

One of these innovations is digital identity. Twenty-five percent of respondents said that they have a digital ID program, which we think is a relatively high number for such a new technology.

This development looks promising. Digital ID can provide credible, accurate and up-to-date information that can instantly verify identity. It is an example of the kind of innovative technology that uses data very effectively.

However, it is not without its challenges. Digital ID requires the digitization of a series of documents, and across the continent there is a distinct lack of standardization and ease of access to documentation.

Innovation in compliance

SSA-based executives may have been at a disadvantage, being situated so far from global financial centers and kept out of the global economy for so long, but these responses reveal an impetus to get ahead.

They show that most compliance departments will likely update their technology solutions within two years. In the past, a lack of telecommunication infrastructure may have been a hindrance, but given the proliferation of mobile technology, this may prove to be one of SSA’s biggest gifts.

With no infrastructure to maintain, upgrade or replace, it is easier to employ innovative and fast-developing technology that allows SSA compliance functions to move ahead of competitors situated elsewhere.

Adoption of compliance programs

Apart from the focus on technology, SSA-based compliance professionals appear to have similar concerns to their global peers. There is a high uptake of specific compliance programs that reveal a focus on certain financial crimes. For example, 73 percent have an anti-money laundering (AML) program, and 70 percent have an anti-bribery and corruption (ABC) program.

There are vulnerabilities, however. Only 43 percent have a sanctions program, and just 32 percent of respondents say they have an ultimate beneficial ownership (UBO) program. The regulatory focus is growing on both of these issues, and this exposes Africa-based organizations to heightened risk.

‘Green crime’

One particular vulnerability for SSA-based organizations is the problem of ‘green crime’. The growing focus of media and global regulatory bodies on emotive issues such as wildlife trafficking — an increasing challenge for some Sub-Saharan countries — should be a concern for local compliance departments.

As regulators grow increasingly determined to tackle green crime and illicit financial flow, issues such as knowing beneficial ownership details in business relationships will become even more critical, especially with such a fluid and fast-moving sanctions situation. Africa-based businesses cannot afford to fall behind.

Financial crime in Sub-Saharan Africa report

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