Skip to content

Financial crime challenges facing sub-Saharan Africa

Our latest survey on financial crime trends in sub-Saharan Africa (SSA) shows weaknesses in risk and compliance programmes that could side-track business opportunities and constrain economic growth at a time when many regional economies are at a crisis point.

  1. To combat the threat of financial crime, Africa-based organisations should focus on the trends of on innovative technology, environmental, social and governance (ESG) risk and disrupted third-party relationships.
  2. It is important for organisations to look at spending on compliance budgets when transitioning to digital, meeting the needs of their business and customers, and achieving regulators’ expectations.
  3. Why is ESG risk is heightened for Africa-based organisations? And how will technology and data play a crucial role in disrupting crime networks?

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

In a time of accelerated change and increasing complexity for the risk and compliance function, responses to the second annual Financial Crime in sub-Saharan Africa survey reveal gaps and vulnerabilities in compliance programmes across the region.

These gaps may require prompt attention. For so many SSA-based businesses, meeting compliance obligations is more than a regulatory issue; it’s a matter of survival. Projected economic growth in the region significantly lags projected growth rates for other regions.

However, with initiatives like the Africa Continental Free Trade Agreement (AfCFTA) and broadband rollout, there are reasons to be optimistic about trade and commerce growth opportunities.

Regardless of how flat economic growth is now, organisations would do well to be aware that opportunities could occur any time in the near future, and they should prepare to take advantage. Ensuring that compliance processes align with international standards is an important step, without this, regulated global companies are unlikely to want to work with them.

Read the report: Financial Crime in sub-Saharan Africa 2021

What does the survey say about financial crime in

sub-Saharan Africa?

This year, nearly half of the survey respondents, 46 percent, are in a leadership position within the company, either as a manager, board member or owner; 40 percent are in a company with over 250 people; and 44 percent are from a company that has a presence in two or more countries.

More than half, 57 percent, report an experience of financial crime or regulatory breach over the past five years.

57% of respondents have experienced a financial crime or regulatory breach in the past 5 years.

There is a clear need for effective risk and compliance programmes that actively help uncover risk.

We noted five clear trends from responses.

Understanding these trends may help SSA-based business leaders know where to focus their attention should they choose to invest more energy in risk and compliance solutions.

1. Compliance programmes lack key components

Regulators in some of SSA’s key markets, like the U.S. and the EU, now require the details of the ultimate beneficial ownership (UBO) structure of companies to be included in due diligence reports, information that can be difficult to locate.

Only 28 percent of respondents said they had a specific programme for UBO.

2. Lack of awareness of a change in scope for third-party risk

There is growing recognition that illicit financial flow travels through other routes outside of the financial system and that illegal trade in rare commodities and humans, for example, can generate significant funds.

Environmental, social and governance (ESG) criteria are used increasingly by financial institutions to rate the value of companies. Without knowing the ESG details of who they are in business with, companies are at risk of unwitting association with entities with links to issues such as trafficking, environmental degradation or unfair labour practices.

Yet, for SSA respondents, only 3 percent view ESG issues as significant concerns.

And while today the focus is on ESG criteria, other issues are likely to be included in the future. Risk and compliance specialists should be aware of the changing norms in third-party risk.

3. A quest for improved data management and analytical capabilities

Given the growing complexity of the risk and compliance environment, it’s not surprising to see the desire for sophisticated technology to support decision-making.

The main reason that 38 percent of respondents invest in a technology upgrade is better data management and analytical capabilities. Another 24 percent worry that a data breach poses the most significant risk to their organisation. With the increase in data protection laws, this is a growing concern for many.

4. The accelerated pace of change reveals vulnerabilities

The most challenging aspect of onboarding and monitoring business relationships is due diligence and know your customer obligations, according to 50 percent of respondents.

The task of due diligence and KYC has grown increasingly complex over the years, and the pandemic has only made it worse. Another 43 percent say that the impact of the pandemic introduced new risk.

There is a need for sophisticated technology and top quality intelligence that will allow for detailed, granular and rapid checking.

How has COVID-19 impacted risk? 43% of respondents say they are experiencing new risk challenges

5. The lack of digital identity solutions

More than one-third, 36 percent, of respondents have yet to embrace digital solutions in their compliance processes.

As regulatory change and complexity continues to add to the burden of the risk and compliance task, technology will continue to innovate to provide fast, credible solutions that help to uncover risk.

Businesses based in SSA stand to benefit.

The lack of telecommunications infrastructure, seen as an impediment to progress, may be to their advantage. With no legacy systems to slow down the process, SSA business teams will have access to the most up-to-date technology, providing them with the ability to quickly close the digital gap.

Establishing a good compliance policy

The risk and compliance teams that are able to understand what is being asked of their team by regulators and are able to quickly assimilate new information into their policies will be the teams that do not only survive the post-pandemic era, but actually gain new business.

With compliance, it’s best to focus on establishing a good compliance policy that is simple, easy to understand and communicate, and effective.

Special report launch: Financial Crime in Sub-Saharan Africa