Nearly three quarters of companies or 75 percent surveyed in Asia Pacific fell prey to financial crimes in the last 12 months compared to 72 percent a year ago, which could mean an aggregate turnover loss of more than $1.45 trillion, report by financial markets data and infrastructure provider Refinitiv US Holdings Inc states.
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The report titled “Innovation and the fight against financial crime: How data and technology can turn the tide” is based on a study conducted in March when 3,138 managers with compliance-related responsibilities at large global organisations from 24 Asia Pacific locations including Australia, China, Hong Kong, India and Singapore were interviewed.
According to the report, companies suffered the consequences of financial crime because of alleged lax approaches to due diligence checks when onboarding new customers, suppliers and partners. This created an environment in which criminal activity could thrive.
“In our report last year, about $1.45 trillion of aggregate turnover was lost as a result of financial crime. This year’s report shows that the cost could indeed be much greater,” it adds.
Alfred Lee, managing director of Refinitiv Asia Pacific says the report reveals an opportunity for companies to invest more in innovation, technology and processes to fight financial crime.
“With three-quarters of companies across Asia Pacific affected by financial crime, more investment must be made in technology and processes. Advancements in artificial intelligence, machine learning and cloud computing are increasing companies’ abilities to analyse data in real time, streamline processes such as Know Your Customer (KYC) and uncover previously undetectable activity.
“At the same time, with companies only conducting due diligence on around half the external partners and customers, despite them accounting for the majority of financial crime cases, this is enabling an environment of criminal activity to flourish,” Lee adds.
The focus on financial crime is on illicit money flows from crimes such as money laundering, bribery and corruption that support human abuses including modern slavery, drug trafficking and prostitution. However, the report took a wider definition to also cover fraud, theft, bribery and cybercrime.
Given the severity of possible losses, Refinitiv says over the next year, companies in the region intend to spend on average 47 percent to mitigate the crisis, compared to 51 percent globally.
“The increased investment emphasises the priority placed on fighting financial crime in 2019 and reflects the amount of pressure respondents are under to be more innovative at reducing risk and costs,” it adds.
Refinitiv is 55 percent-owned by private equity firm The Blackstone Group LP and 45 percent by Thomson Reuters Corp.
Meanwhile, the study also found that 44 percent of Asia Pacific companies have experienced cases of financial crime by their own employees. Some 83 percent of those surveyed in the region say data privacy regulations are restricting their ability to collaborate against financial crime, and 88 percent believe that the benefits outweigh the risks when sharing information and collaborating against financial crime.