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Financial crime: vital to screen all suppliers regularly

Phil Cotter, Managing Director, Risk, Thomson Reuters, explains that “Financial crime is multi-faceted, multi-national and very often invisible, making it hard to identify, measure and combat. Its impact is felt in many ways.” as he introduced the results of their 2018 SURVEY REPORT - an independent survey of over 2,300 senior executives in large companies, across 19 countries, to identify the true cost of the problem. They also conducted interviews with leading NGOs (Education Endowment Foundation, Transparency International UK, Walk Free Foundation) and the European Union’s law enforcement agency to reveal the wider economic, social and human impact.

The scale of financial crime today

This report takes a wider definition covering all financial crimes to provide as complete a picture as possible on the social and financial impact, so they included:

  1. Fraud
  2. Money laundering
  3. Theft
  4. Bribery & corruption
  5. Cybercrime
  6. Slavery/human trafficking

Although the survey found that respondents spent on average, 3.1% of annual turnover combating financial crime and that 47% have been a victim of financial crime over the last 12 months, it also found that it is too easy for perpetrators to slip through the net:

  • 9% of organizations have dealt with over 10,000 third party vendors, suppliers or partners during the last 12 months
  • 41% of survey respondents have never screened their third party vendors, suppliers or partners, and only 36% are screened on an ongoing basis
  • 59% of all detected financial crime is reported internally and, for the most part, reported externally. 

The cost is huge for companies, governments and individuals. The survey found that:

  • $1.45trn is the aggregate lost turnover as a result of financial crimes, according to the organizations surveyed around the world, representing 3.5% of their global turnover
  • 40.3 million people are victims of modern day slavery according to the Global Estimates of Modern Slavery (ILO and Walk Free Foundation).  

And the survey found that much of the fraud generated internally with 69% of bribery and corruption was internal, and that only in fraud and cybercrime was the majority generated externally.

Business cost of financial crime

The damage done by financial crime extends well beyond companies to governments, national economies and individuals. The survey found that the business cost of financial crime are huge as the two figures below show:


Source & Copyright©2018 - Thomson Reuters 


CTMfile take: Businesses have a vital responsibility in reducing financial crime in many ways. Particularly important is to screen regularly, rather than just at the onboarding stage. The fact that 41% of relationships were never screened for financial crime risk is just irresponsible.


This item appears in the following sections:
Fraud Prevention
Anti-Money Laundering Fraud Prevention
Terrorist Financing
ID Systems & Services in Fraud Prevention
Minimizing Fraud Procedures
Minimizing Payment Fraud

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