Financial crime is often seen as a victimless crime and often doesn’t gain the attention that its true cost represents. However, a new report is lifting the lid on the scope and impact financial crime is having through the Asia-Pacific region.
The report from Thomson Reuters, which is the first of its kind, has highlighted the fact that almost 50% of large APAC organisations have been victims of fraud, theft, money laundering or other financial crimes. The cost associated with financial crime was estimated at a staggering $1.45 billion aggregated loss of turnover.
The data suggest that the organisations that took part in the survey had suffered at least one incident of financial crime over the past 12 months, with cybercrime and fraud cited as the most common financial crimes.
Thomson Reuters conducted the survey of more than 2,300 senior business leaders in large companies to highlight the scope of such crimes across the world. In the report, financial crime is defined as bribery and corruption, money laundering, fraud, theft and cybercrime.
Broadly speaking, companies are spending 3.1 per cent of annual turnover combating financial crime, representing an aggregate of $1.28 trillion.
With the scope of financial crime growing, 75% of companies looking to mitigate their risks by simply not working with high-risk vendors. Due to the scale of transactions that are taking place every year for many organisations, the onboarding process is a crucial tool in identifying vendors that pose a high-risk to a company.
Protecting Digital Assets
Despite the huge amount of money and time being thrown at the problem of financial crime, it appears there’s plenty of work still to do.
James Price, Managing Director of Experience Matters a Business Advisory specialising in Information Management, believes financial crime and cyber-security are issues that boards need to be putting more focus on.
“There remains a profound lack of understanding by the most influential parts of the business community as to the cause of cyber-security exposures and the way to address them. Boards and C-Level executives need to recognise that data, information and knowledge comprise a vital business asset that should be managed as such. Every organisation has data, information and knowledge that is critical to their survival,” said Mr Price.
James Price also feels that it’s time for organisations to start treating their information as a digital asset.
“All organisations need to manage their data, information and knowledge as a vital business asset. If they do that, they will address their data security exposures. In addition they will improve their ability to exploit their data through effective analytics and data science, they will be able to safely move to the Cloud, they will be able to innovate and either initiate or defend against digital disruption and they will be able to achieve the more mundane objectives of increasing revenue, reducing costs, mitigating risks, creating competitive advantage and improving staff morale.”
Mr Price also feels that there is a real opportunity for companies to use their digital assets to their advantage and mitigate cyber risk.
“Cyber-security is not a single issue but it is an important one; it is a critical component of managing information assets effectively.”
Mr Price also feels that it is too easy to pass the buck within an organisation and those at the executive level need to take a more proactive approach.
“Boards and C-Level executives should not abdicate their responsibility and, much more importantly, their accountability to IT who are blamelessly incompetent in the management of Information Assets. Imagine you are your organisation’s Chief Legal Counsel. Do you know more about the practice of law than IT does? You’d hope so. And do you know more about what information is required to practice law than IT does? And are you more interested in the quality of that information than IT is? So why on earth would you give the responsibility for managing that crucial business asset to IT? Doing that is somewhere between being utterly unfair and professionally negligent. ” he said.
Human Impact of Financial Crime
One of the other key findings from the Thomson Reuters report is that there is a significant human cost to financial crime.
The report highlights the fact that most corporations across the globe do not realise the true cost of financial crime which extends beyond financial and reputational damage to societal evils such as modern-day slavery and human trafficking.
The Global Estimates of Modern Slavery, produced by the Walk Free Foundation and International Labour Organisation, estimates that over 40 million people today are in modern slavery. According to the Walk Free Foundation’s 2016 Global Slavery Index, five countries – India, China, Pakistan, Bangladesh and Uzbekistan – are responsible for nearly 60% of modern slavery globally
Julia Walker, Head of Risk & Regtech from Thomson Reuters believes that all those involved need to have a better understanding of the true cost of financial crime.
“Financial crime is not a faceless crime, the most vulnerable in our society are preyed on and exploited by organized crime for profit. Financial institutions are carrying the financial burden collectively spending billions trying to prevent money laundering and the proceeds of illicit activity,” she said.
Thomson Reuters is committed to doing what it can to help build awareness and provide better data on the scope of financial crime around the world.
“Year on year they are seeing greater amounts disappear from their business as result. Thomson Reuters is committed to uncovering the true scale of the challenge, working together with Financial Institutions, governments, and law enforcement agencies to create awareness of the scale of the problem. By gathering better data and intelligence and forming coalitions, we will increase our ability to effectively fight financial crime across the world.”