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Financial crime risk rises in the Middle East and North Africa

Phil Cotter
Phil Cotter
Managing Director, Risk business at Refinitiv

As the COVID-19 pandemic impacts operations worldwide, how has MENA’s risk and compliance functions coped with a rapidly changing environment and helped in the fight against financial crime?


  1. Overnight, the pandemic forced a shutdown of supply chains and third-party relationships, and organisations had to scramble to find new suppliers and vendors closer to home.
  2. The level of disruption was unprecedented, and at the same time, new regulation focused on hard-to-find documents and information.
  3. Standards of MENA-based risk and compliance functions are under threat as rising complexity threatens to undo so many gains.

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According to our latest survey – Financial Crime in MENA Report 2021: a surge in risk – the COVID-19 pandemic had a substantial impact on the risk and compliance functions in MENA.

Over half of the respondents, 51 percent, said that they were facing new risk challenges, 21 percent said that they had changed their processes to accommodate rapid regulatory change, and 34 percent have changed their processes to accommodate the rapid digitalisation of the financial sector

COVID-19: 51 percent of respondents say that they were facing new risk challenges. Financial crime in the Middle East and North Africa

Download the report: Financial Crime in the Middle East and North Africa 2021

Disruption to supply chains and third parties

The pandemic caused massive disruption to supply chains and third-party relationships worldwide. Overnight, production plants were shut, offices were forced to close, and travel was suspended for all but the most essential reasons.

To survive, many organisations moved quickly to source new vendors closer to home. However, each new relationship represents potential risk and requires screening and due diligence before any agreement is reached.

Responses show that many risk and compliance functions are not well equipped to assess risk quickly:

  • Nearly half (48 percent) of respondents indicate a lack of anti-bribery and corruption controls.
  • 53 percent say due diligence and KYC is the most challenging aspect of onboarding and monitoring of business relationships.

Risk and compliance officers are well used to change, but the pace of change has accelerated and as our survey shows, many are struggling to keep up.

53 percent of respondents say due diligence and KYC is the most challenging aspect of onboarding and monitoring of business relationships. Financial crime in the Middle East and North Africa

New regulatory focus

The pandemic may have halted various projects, but it did not appear to slow down the pace of regulatory change.

Recent regulation such as the EU 6th Anti Money Laundering Directive and the U.S. Anti-Money Laundering Act of 2020 has impacted MENA-based businesses with access to those markets. The regulations require a more detailed compliance response, including ultimate beneficial ownership (UBO) details for certain third-party relationships.

From our survey responses, however, we note that:

  • Only 5 percent say that increased compliance activity focuses on UBO.
  • Only 3 percent say they expect any increased compliance activity to focus on UBO in the future.

UBO details are a vital element of a successful sanctions programme but can be notoriously difficult to locate, and MENA-based risk and compliance officers may need help to source the necessary information.

UBO details will become increasingly important to the risk and compliance function over the next few months and it is important that organisations do not underestimate the potential impact of the new requirements.

Changing scope of financial crime risk

Over the years, the way criminals launder money through the global financial system has become more sophisticated and new risks are emerging.

Global agencies such as the Financial Action Task Force have highlighted the risk of the rise of environmental crimes, such as wildlife trafficking, particularly relevant as sustainable investment and finance will be increasingly important in the future.

Regulators are already planning to strengthen regulation in this area. For example, if implemented, proposed EU regulation will require organisations with access to the EU market to conduct due diligence on ESG-related risk that may be hiding in third-party relationships.

However, even without regulation, because of the heightened public awareness of ESG issues, companies are substantially exposed to potential reputational damage if they do not carry out adequate due diligence.

Compliance departments should review their policies and practices for exposure to risk such as the trafficking in drugs, arms, wildlife, and humans, as well as assessing for broader risk such as abusive labour practices and environmental exploitation.

These areas, however, appear to be a blind spot for many, according to survey responses:

  • Fewer than a quarter (24 percent) of respondents say they have a drugs/arms trafficking programme.
  • Only 19 percent have a modern slavery/human trafficking programme.
  • Just 12 percent have an anti-wildlife trafficking programme.

Rapid digitalisation

The pandemic has dramatically accelerated the digital transformation of the financial sector, a trend that is sure to continue to gather momentum. The need for innovative technology, such as digital identity, that will help safeguard the integrity of the financial system, is crucial.

  • Responses reveal that nearly a third of respondents have embraced digital identity solutions, and we expect adoption rates to increase sharply: 30 percent have a digital identity programme.
  • 31 percent say they have embraced digital identity to help meet compliance obligations.

Privacy laws creating further complexity in data management

Recent updates to privacy laws, both regionally and internationally, are adding another layer of complexity to data management

Responses show that there is an awareness of this risk and a need for further support:

  • A quarter (25 percent) say that a data breach poses the most risk to their organisation.
  • 40 percent say their main reason for investing in a technology upgrade is for better data management and analytical capabilities and faster processing times.

Progress in upgrading standards and processes

There has been a substantial effort by MENA-based risk and compliance functions in recent years to upgrade and align their standards and processes with best practice international norms.

Last year’s survey showed that 70 percent of respondents had adopted some sort of innovative technology; this year the number has increased to 78 percent.

This progress is encouraging but it’s also evident that the rapidly evolving risk and regulatory landscape poses new challenges for risk and compliance professionals. To manage this challenging environment successfully will require a continuous assessment of policies and practices.

Refinitiv remains committed to helping firms adopt a strategic and holistic approach to managing and mitigating risk. We continue to invest in our data and products to ensure that we provide the best support possible to our customers while they navigate the rapidly changing risk and regulatory environment.

Download the report: Financial Crime in the Middle East and North Africa 2021