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Strategies for fighting financial crime

Anubhuti (David) Kumar
Anubhuti (David) Kumar
Proposition Director – Financial Crime (Screening) Data and Software, Refinitiv, an LSEG business

Strategies for fighting financial crime

Fighting financial crime requires organizations to work smarter so that all their compliance gaps are plugged, including across third-party networks. What are the strategies for effective screening and due diligence?

  1. The failure to screen third-party relationships creates compliance gaps that foster an environment where financial crime can flourish.
  2. Our screening solutions World-Check Risk Intelligence has just won ‘Best Anti-Money Laundering Technology’ award for 2018 for its role in closing compliance gaps
  3. Strategies for fighting financial crime include greater focus on the use of enhanced due diligence and quality risk intelligence.

Financial crime is everyone’s war.

The global repercussions of this so-called ‘victimless crime’ are far reaching, with a host of often devastating consequences for economies, societies, and individuals.

The proceeds of financial crime are frequently used, for example, to fund the financing of terrorism; conceal and promote forced prostitution, slavery and child labor; and perpetuate environmental crime.

In addition, financial crime results in a significant loss of revenue for national exchequers. Less money is therefore available to fund schools, hospitals, and essential services, and this in turn leads to a host of social and societal problems.

Download the interactive infographic below to see the different crime segments compared to each other and better understand the potential damage on society.

$1bn in missing tax revenues could pay for...

Global organizations are fighting back, but winning the war on financial crime is a costly and complicated undertaking, and companies across the globe face a plethora of constraints and challenges.

Cost of financial crime

Our recent survey into the costs and implications of financial crime garnered feedback from over 2,000 senior managers at large global organizations across 19 countries.

Survey responses revealed that financial crime is widespread: 47 percent of all respondents had been victims of at least one form of this crime in the year preceding the survey.

Moreover, respondents indicated that they are operating under a range of ever-increasing pressures, including to increase turnover and to comply with regulations aimed at eradicating financial crime.

Incidence of financial crime over last 12 months. Strategies for fighting financial crime

A further challenge is the sheer magnitude of global third-party networks.

According to survey respondents, the average number of global third-party relationships in the year preceding the survey was 7,693. Monitoring such vast networks is costly and time consuming.

Time and resource constraints mean that screening is often inadequate.

41% of relationships were never screened for financial crime risk

Respondents revealed that 36 percent of all third-party relationships are fully screened, both at the onboarding stage and on an ongoing basis.

These challenges result in compliance gaps that foster an environment where financial crime can flourish, but what strategies can help to successfully mitigate financial crime?

Strategies for fighting financial crime

The strategies that can help to successfully fight financial crime are:

  • Streamline your screening and due diligence

Robust due diligence — including initial screening and ongoing monitoring in line with AML and KYC requirements, as well as monitoring of politically exposed persons (PEPs) — is non-negotiable.

But given the vast third-party networks with which organizations interact, there is a pressing need to streamline and simplify these functions.

Ultimate screening goals include reducing false positives and cycle times, and focusing effort on the areas of greatest risk.

Tools to help you achieve these aims should offer structured content that enables intelligent searches and which can be filtered to pinpoint the information most relevant to your needs at any particular time.

Additional specialized features, such as case management capabilities, can further streamline and improve operational efficiencies by enabling managers to direct cases to the right individuals and specialist teams.

We are very honoured to announce that our World-Check Risk Intelligence platform has won Central Banking’s ‘Best Anti-Money Laundering Technology’ award for 2018.

The award follows a string of recent product developments that have focused on delivering more intelligent searching of sources through machine learning. We want to ensure our customers are able to meet their compliance obligations and to close the compliance gaps by simplifying the customer risk screening process so they can step up their fight against financial crime.

Phil Cotter quote

A further aspect to consider is how you access due diligence and screening solutions.

Technological advances — such as a platform to host an application or service — help to make remediation quicker, and API technology is already available to allow cutting-edge solutions to integrate seamlessly into existing workflow tools.

  • Undertake enhanced due diligence when necessary

When your screening and due diligence processes flag potential risk, there may be a need to conduct enhanced due diligence (EDD) to mitigate and protect against reputational damage during the onboarding of heightened risk third-parties.

EDD forms part of a best-practice, risk-based approach and may be required when automated risk information screening reveals risk, or at critical times in an organization’s life-cycle, such as before a merger, acquisition, or joint venture.

  • Make sure you access quality information

No amount of due diligence will help in fighting financial crime if the data on which it is based is unreliable.

In a fast-paced business environment characterized by vast global networks, the critical role of reliable, accurate data cannot be underestimated as an indispensable tool in developing a complete view of risk.

Industry research reveals a widespread lack of quality data intelligence among organizations, including unreliable risk data sources, insufficient availability of risk data, and poorly connected data sources.

Good quality risk intelligence should be sourced from a broad range of reputable sources, follow strict research criteria, and remain objective at all times.

Plugging the compliance gaps

As a sobering reminder of the magnitude of financial crime, our research concludes that US$1.45 trillion (3.5 percent) of global turnover is currently lost to this form of corruption.

As the battle against this pervasive scourge continues, forward-thinking organizations should focus their efforts on implementing sound strategies that will improve operational efficiencies and help to plug the compliance gaps that allow financial criminals to succeed.

It is time to work smarter — Let’s #FightFinancialCrime

Revealing the true cost of financial crime – 2018 survey report