Tuesday 16 August 2022

Nadim Najjar

45pc in Mena victim of financial crime: study

DUBAI, May 24, 2018

Forty-five per cent of executives in the Mena region had been a victim of at least one form of financial crime during the 12 months preceding a survey by Thomson Reuters as opposed to 47 per cent globally.

Extensive third-party networks are evident in Mena, but just 42 per cent of these relationships are fully screened at both onboarding stage and on an ongoing basis, said the global survey on the Cost of Financial Crime featuring new findings in Mena.

Whilst this percentage is higher than the global average, it is still very low and indicates that more work needs to be done in this important area.

“Across the Mena region, 96 per cent believe that bribery and corruption is an important issue to tackle and 97 per cent are supportive of sharing compliance best practice by companies. In fact, the majority of respondents across the region support the idea of collaboration in the ongoing fight against all forms of financial crime,” said Nadim Najjar, managing director, Mena, Thomson Reuters.

“The survey uncovered some shortcomings, with respondents globally indicating that just 57 per cent fully screen and classify risk; 52 per cent fully conduct due diligence; and 52 per cent fully monitor and refresh. Within the region, some notable gaps were also evident.

“In Mena, only 59 per cent fully implement workflow and process reports and just 60 per cent fully conduct due diligence.  Even though companies across the region are spending an average of 3.8 per cent of their global turnover to fight financial crime, gaps in compliance remain,” he added.

Within the region 57 per cent believe that the consequence of this bribery and corruption will be less government revenue. Mena was the only region where the highest proportion of respondents selected this answer.  More than 90 per cent of respondents agreed with the statement ‘we struggle to educate and influence colleagues on bribery and corruption in some regions’.

When it comes to rooting out financial crime, reliable and complete data is a critical requirement needed to develop a 360-degree view of risk.  Additional Thomson Reuters research has revealed a plethora of challenges that organizations encounter, specifically relating to third party risk data.  These include unreliable risk data sources, insufficient availability of risk data and poorly connected data sources.

The global average was reported as 7693, but rose to 9007 in the Middle East and North Africa.  Whilst this figure is substantially higher than the global figure, it remains some way off the numbers reported across Latin America and the Caribbean, where companies have an average of 12,985 relationships, the highest reported across all regions surveyed.

Survey respondents highlighted the rate of pressure on their companies to achieve these expectations during the 12 months post-survey and globally 83 per cent reported that pressure to increase turnover will be either extreme or significant. Respondents in the Mena region were in agreement, with a significant proportion of 89 per cent also citing the same issue.

The consequences of compliance failure are significant, and compliance teams are aware of their responsibilities, but nonetheless often struggle to fully screen and monitor such vast numbers, as borne out by survey responses.

Globally, an average of just 59 per cent of these relationships is screened with regard to the issues of bribery and corruption; money laundering; fraud; theft; cybercrime; and human trafficking. In the Mena region, this figure rises to 65 per cent.

Ongoing monitoring to identify potential risk is also of critical importance, but the survey once again revealed that, after initial screening, an average of just 59 per cent of relationships are monitored and reviewed on at least an annual basis.  In keeping with the trend, this figure rose to 64 per cent in Mena.  While these higher percentages are encouraging, it nonetheless means that just 42 per cent of relationships in the region are fully screened at both onboarding stage and on an ongoing basis.

There is a further ‘hidden’ cost – the opportunity cost that results when organizations avoid doing business with high risk customers because they feel unable to identify actual risk. In the Mena region this percentage was even higher at 77 per cent and reflects that companies are aware that any connection, even unwitting, to any form of financial crime could potentially result in regulatory fines, reputational damage and even prosecution. – TradeArabia News Service

Tags: Mena | Thomson Reuters | financial crime |

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