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Financial crime report: Costs & fighting back

Che Sidanius
Che Sidanius
Global Head of Financial Crime & Industry Affairs, Refinitiv / Chair of the Europe Chapter, Coalition to Fight Financial Crime

A major financial crime report uncovers the real impact on business, people and society, as well as overwhelming support for the use of intelligence sharing to #FightFinancialCrime.

  1. Nearly half of respondents in the report say their organization has been the victim of at least one form of financial crime in the last 12 months.
  2. The financial crime report highlights the role of machine learning and artificial intelligence in helping over-burdened compliance teams identify potentially suspicious activity.
  3. Some 94 percent of respondents back initiatives to share financial intelligence/information on specific cases and on compliance best practice.

In March 2018, we commissioned a global financial crime survey to build a truly holistic picture of bribery and corruption, money laundering, fraud, theft, cybercrime, and slave labor/human trafficking.

We generated feedback and insights from well over 2,300 senior managers of large organizations, both publicly listed and privately owned, across 19 countries.

The survey found that financial crime is pervasive, with nearly half (47 percent) of respondents confirming that their organization had been the victim of at least one form of financial crime in the last 12 months.  Our Revealing the True Cost of Financial Crime report was then compiled from the survey results.

Why financial crime flourishes

The responses in our financial crime report reveal that a combination of factors drive these crimes by contributing to an optimal environment for them to flourish.

These factors are playing out against a backdrop in which organizations are under increasing pressure to grow profits in a global marketplace. For example:

  • Extensive third-party networks mean nine percent of organizations have dealt with over 10,000 third-party vendors, suppliers or partners during the last 12 months.
  • Insufficient screening and reporting means 41 percent of respondents have never screened their third-party vendors, suppliers or partners.

Cost of financial crime

Respondents indicated that they spent an average of 3.1 percent of annual turnover (or an aggregated US$1.28 trillion across the organizations surveyed) trying to prevent financial crime over the last year.

Join the conversation: #FightFinancialCrime

Despite this, the same organizations indicated that they lost an average of 3.5 percent of their global turnover (or a total of US$1.45 trillion) as a result of these crimes.

Inefficient, costly compliance processes are simply inadequate when it comes to screening vast international third-party networks, and organizations are clearly struggling to curtail financial crime.

A knock-on effect is that formal compliance has become more costly and more demanding.

Not only this, C-suite staff are increasingly involved in overseeing compliance-related issues, rather than being allowed to concentrate on higher value-add aspects of their organizations.

Use of cutting-edge technology

A key tool for successfully rooting out financial crime is reliable and complete data that can be used to develop a 360 degree view of risk.

Many organizations struggle to access reliable data, but the good news is that technology, including machine learning and artificial intelligence, is available to help over-burdened compliance teams identify potentially suspicious activity.

This combination of better data and advanced technology offers a real opportunity for organizations to ‘work smarter’ and root out deep-seated inefficiencies when building a holistic and informed view of risk across their global supply chains.

Forgotten victims of financial crime

Our report also sought to shine a spotlight on the other, often forgotten victims of financial crime.

These crimes, often assumed to affect big business alone, cause incalculable harm across the globe. For example, 40.3 million people are victims of modern day slavery according to the Global Estimates of Modern Slavery (ILO and Walk Free Foundation).

Phil Cotter quote

Moreover, billions of lost tax revenue as a result of financial crime leads to severe societal consequences, as less money is available to fund essential services such as education.

The power of collaboration

A key conclusion from our report is that working together is vital to winning the war against financial crime.

This view is widely supported, with 94 percent of respondents supportive of sharing financial intelligence/information on specific cases and sharing compliance best practice.

This points to a clear appreciation of the importance of collaboration in the fight against financial crime.

Ongoing initiatives across the globe to root out financial crime are supported by a recent IMF announcement that its executive board has endorsed a new framework for stepping-up engagement on governance and corruption in member countries.

As part of our ongoing commitment to #FightFinancialCrime, in collaboration with Europol, we launched a coalition at the World Economic Forum in Davos earlier this year.

This aims to improve awareness of the extent of financial crime, promote more effective information sharing and establish enhanced processes to share best practice.

Listen to the webinar recording hosted on June 26 2018, to hear subject matter experts from the World Economic Forum, the Royal United Services Institute (RUSI) and Rani Hong discuss the impact financial crime is having across the globe and what can be done to help mitigate this challenge.