Refinitiv report finds Asia Pacific companies to ramp-up innovation as 75% fall prey to financial crime

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Almost three-quarters of Asia Pacific organisations have been victims of financial crime over the past 12 months.

Refinitiv, one of the world’s largest providers of financial markets data and infrastructure, has published its second annual financial crime report yesterday. Innovation and the fight against financial crime: How data and technology can turn the tide, one of the most comprehensive surveys of international businesses, highlights that almost three-quarters (75%) of Asia Pacific 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. This wake-up call has led to 60% of Asia Pacific companies adopting new technologies to combat financial crime.

In its 2018 report, Refinitiv outlined that $1.45 trillion of aggregate turnover is lost as a result of financial crime.[1]This year’s report shows that the cost could indeed be much greater. Only 62% of the 3,000 compliance managers Refinitiv surveyed across 24 geographies globally claimed that financial crimes were reported internally, and just 60% said that they were reported to the relevant external organization.

Over the next year, companies in Asia Pacific intend to spend on average 47% more to mitigate the crisis, compared with 51% globally. The increased investment emphasizes the priority placed on fighting financial crime in 2019 and reflects the amount of pressure respondents are under to be more innovative to both reduce risk and costs.

According to the report, an overwhelming majority of respondents globally (97%) believe that technology can significantly help with financial crime prevention with cloud-based data and technology the top choice, followed by AI and Machine Learning tools. Nearly, three quarters (72%) across the Asia Pacific region are struggling to harness technological advancements, and marked differences across the region, with 52% in China and 84% in India expressing the same difficulty.

Alfred Lee, Managing Director, Asia Pacific at Refinitiv, said the report reveals an opportunity for companies in the region to invest more in innovation, technology and processes to fight financial crime.

“With three-quarters of companies across Asia Pacific affected by financial crime in the past year, more investment must be made in technology and processes. Advancements in AL, ML and cloud computing are increasing companies’ abilities to analyze data in real-time, streamline processes such as Know Your Customer (KYC) and to uncover previously undetectable activity.

“At the same time, with companies only conducting due diligence on around half of external partners and customers, despite them accounting for the majority of financial crime cases, this is enabling an environment for criminal activity to flourish.

“Increased collaboration between technology companies, governments and financial institutions is critical to address this issue.”

Below are the key findings for Asia Pacific

  • 75% of large organizations in Asia Pacific have been victims of financial crime over the past 12 months, compared to 72% globally. This was highest in India at 89%.
  • 44% of Asia Pacific companies have experienced cases of financial crime by their own employees.
  • An average of 4% of global turnover is spent on customer and third-party due diligence checks, rising to 5% in Australia and India in Asia Pacific.
  • 52%: the percentage of external relationships that did not have an initial formal due diligence check at the onboarding stage. This rises to 62% in Hong Kong.
  • 72% across Asia Pacific are struggling to harness technological advancements, including 52% in China and 84% in India.
  • Across Asia Pacific just over half (52%) of the data and legal documentation obtained to carry out due diligence is in a digitized format.
  • 82% in China (highest across all countries), while only 54% in Australia are prioritizing automation and digitization for investment.
  • 81% globally and 83% in Asia Pacific say data privacy regulations are restricting their ability to collaborate against financial crime.
  • 88% in Asia Pacific consider that the benefits outweigh the risks when sharing information and collaborating against financial crime. This is highest in India at 95%.

While the report focuses on the many emerging technologies coming on stream in the fight against financial crime, it also urges organizations not to overlook another vital form of innovation – collaboration. Just over eight in 10 (81%) respondents said that there is some sort of existing partnership or taskforce in their country to combat financial crime, including 85% in Asia Pacific. 86% believe that the benefits of sharing information within such a partnership organization outweighs any possible risks – this was slightly higher in Asia Pacific at 88%.

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.

[1] Revealing the True Cost of Financial Crime Report, Refinitiv, 2018: https://www.refinitiv.com/content/dam/marketing/en_us/documents/reports/true-cost-of-financial-crime-global-focus.pdf

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