73 Percent of Firms in the Middle East Aware of Financial Crimes

Refinitiv’s second annual financial crime report titled “Innovation and the fight against financial crime: How data and technology can turn the tide” highlights that almost three-quarters (72 per cent) of organisations have been victims of financial crime over the past 12 months with a lax approach to due diligence checks when onboarding new customers, suppliers and partners cited as creating an environment in which criminal activity can thrive.

In its 2018 report, Refinitiv outlined that $1.45 trillion of aggregate turnover is lost as a result of financial crime. This year’s report shows that the cost could indeed be much greater.

Gaps in formal compliance persist – globally, over half (51 per cent) of external relationships did not have an initial formal due diligence check at the onboarding stage and this situation was echoed by the same percentage of respondents across the Middle East.

An average of 4 per cent of global turnover is spent on customer and third-party due diligence checks, rising to 5 per cent in the UAE. According to the report, 100 per cent in Saudi Arabia and 99 per cent in the UAE believe that technology can significantly help with financial crime prevention.

About 61 per cent of respondents in the UAE and 88 per cent in Saudi Arabia struggle to harness technological advancements, while 52 per cent in Saudi Arabia are prioritizing automation and digitization for investment.

About 85 per cent of respondents in Mena, rising to 92 per cent in Saudi Arabia, believe humans are a necessary asset to source trusted data and train algorithms. More than 95 per cent in Saudi Arabia (the highest in the region) consider that the benefits outweigh the risks when sharing information and collaborating against financial crime.

A significant majority (78 per cent) across the region are struggling to harness technological advancements and a lack of digitization is evident, which may be stalling progress. Across the region just 53 per cent of the data and legal documentation actually obtained to carry out due diligence is in a digitized format.

Phil Cotter, managing director of the Risk business at Refinitiv, said the results showed that businesses need to do more to invest in technology to address the problem.

“It is clear from the results of this report that businesses exposed to financial crime threats need to maximize their use of technology and future collaboration could prove key to realising the potential of innovation, particularly between tech companies, governments and financial institutions,” Cotter said.

“Significant advancements in technology, facilitated by innovations such as AI, ML and cloud computing, are already under way. These technologies are enabling intelligence to be gathered from vast and often disparate data sets which together with rapid advances in data science, are transforming the approach to compliance, streamlining processes such as Know Your Customer (KYC) and helping to uncover previously hidden patterns and networks of potential financial crime activity.”

In 2018, Refinitiv partnered with the World Economic Forum and Europol to form a global Coalition to Fight Financial Crime. The Coalition is working with law enforcement agencies, advocacy groups, and NGOs to address the societal costs and risks that financial crime poses to the integrity of the global financial system. – TradeArabia News Service