Financial crime is a significant contributor to the lack of global success in achieving the UN’s sustainability goals. A Refinitiv white paper examines how the world can turn the tide, including through supply chain risk tools, ESG data, and greater collaboration.
- Financial crime remains pervasive and is contributing to and supporting both ongoing illegal activity relating to the environment, and human trafficking.
- The private sector response needs to focus on supply chain risk and supporting sustainable investment decisions through the use of trusted data, technology and human intelligence.
- A Refinitiv white paper has examined the links between our lack of success in achieving the UN’s sustainability goals and financial crime, with the power of collaboration one of its key recommendations.
Environmental crime remains a global phenomenon and is certainly not limited to individual countries or regions alone. Macro initiatives to curb illegal activity are already in place, including the UN’s 17 Sustainable Development Goals that apply to all countries.
These goals are described by the UN as ‘the blueprint to achieve a better and more sustainable future for all’ and seek to address many global challenges, including those related to poverty, inequality, climate and environmental degradation.
As yet, no country is on track to meet these goals, a revelation that highlights the fact that much more action is needed if we are to turn the tide in favor of our planet — and the private sector has an invaluable role to play.
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The scourge of financial crime
Alongside rampant environmental crime, financial crime remains pervasive and is contributing to and supporting both ongoing illegal activity relating to the environment, and human trafficking.
Financial crime costs governments and societies billions of dollars every year, and not only are these funds being used to further illicit activities, but the opportunity cost they represent is significant as this money could help to promote awareness and achieve critical sustainability goals.
Refinitiv research into the pervasive scourge of financial crime has delivered some invaluable insights over the last two years.
Headline findings have confirmed that financial crime remains widespread and our 2019 survey also revealed that, despite companies spending an average of four percent of turnover on customer and third-party due diligence checks, 51 percent of external relationships did not have an initial formal due diligence check at the onboarding stage.
Such gaps in formal compliance suggest that existing processes are not effective and that innovation and a fresh approach to combating financial crime are needed.
While macro initiatives relating to sustainable development are crucial, they need to be supported by micro initiatives at organizational level, including identifying and eradicating financial crime in third-party networks, and promoting long-term sustainable investment decisions.
Steps to meeting the UN’s sustainability goals
- Identify risk in supply chains
On an organizational level, every individual compliance team has a part to play in identifying and exposing financial crime. Best practice tells us that financial crime screening and related due diligence remain our best defense against corruption, but these essential operational tools also have an important social element that warrants consideration.
Once each business knows where their key impacts, risks and opportunities lie, they can focus their resources effectively and fight back against financial criminals.
- Promote sustainable investment decisions
The private sector can also play an invaluable role in actively promoting sustainable development. To achieve this, each individual organization must strive to make long-term decisions that drive positive change.
Harnessing the right tools can help organizations to make better investment decisions and build sustainability into their investment and business strategies, based on companies’ performance in critical areas such as climate change, diversity, business ethics and corporate governance.
The ability to differentiate using environmental, social and governance (ESG) criteria has become critical.
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- Financial crime screening data
Screening is no longer viewed as a tick-box exercise necessary for compliance, but as an essential tool to uncover risk early in the game and protect organizations from reputational damage.
Compliance teams striving to ensure that their internal operational processes uncover potential risk need effective financial crime screening data.
This data should be collated from trusted sources to provide complete coverage relating to politically exposed persons, state owned entities and state-invested enterprises, global sanctions lists, narrative sanctions, global regulatory and law enforcement lists, and negative media.
Screening data should also offer insights into ultimate beneficial ownership, since identifying the true beneficial owners of an entity is an essential part of thorough due diligence, but is often a complex undertaking as organizations are frequently required to unwrap complex and interwoven ownership hierarchies as part of the process.
Furthermore, in order to mitigate the risk of doing business at sea, vessel data including identity, location and ownership information should be obtained so that each vessel can be screened for potential links to financial crime, sanctions or embargoed vessels or ports before it is engaged.
Complete data such as this helps organizations to form a holistic view of risk, which in turn leads to better decisions and enhanced compliance with regulatory obligations. Moreover, this data should be fully structured, aggregated, and de-duplicated so that it can be easily absorbed into existing in-house workflows.
- ESG data
Once again, making better, more sustainable investment decisions starts with complete data that is rigorously quality controlled and verified to ensure that it is standardized, comparable and reliable.
In order to promote the sharing of trusted data such as this, Refinitiv has developed The Sustainable Leadership Monitor, a data-driven app that uniquely aggregates financial and ESG data to analyze the long-term orientation of companies and provide an invaluable tool for the private sector to make more informed decisions about their third-party relationships.
The importance of collaboration
The open sharing of more transparent and reliable data, and the intelligent use of leading-edge technology may not constitute a complete solution to financial, environmental, and other crimes, but they can help us to catalyze the necessary shift in behavior that will ultimately lead to success in eradicating corruption and achieving global sustainable development goals.
There is, of course, another crucial element that must be added to this equation: the power of collaboration.
At Refinitiv we believe that widespread collaboration is key if we are to achieve more consistent global standards, and that the world’s biggest sustainability challenges require collective leadership if they are to succeed.
We believe that we all share the responsibility to act where we can.
From fashion to furniture, from food to pets, the products of crime may be hidden in plain sight — an invisible part of our everyday lives — and in this respect the private sector holds the power to step in and play an invaluable role, offering much-needed micro-level support that will ultimately help us to achieve our combined macro goal of success in meeting the UN’s sustainability goals.