Trade-based financial crime hits $1.6 trillion annually

Trade-based financial crime (TBFC) extracts $1.6 trillion from the global economy each year, according to research from Eastnets, in collaboration with Finextra. As financial institutions battle these losses, the report highlights crucial barriers to detection, both internal and external. 

Internally, 42% of financial institutions contend with fragmented systems spread across three to four departments, undermining real-time TBFC detection efforts. Externally, 65% cite complex regulatory requirements as a major hurdle. The result is a slower response to red flags, missed opportunities to prevent financial crime, and heightened risk of regulatory penalties. 

Institutions are increasingly looking to AI and automation to address these issues. 87% of respondents expect AI to play a transformative role in TBFC detection within the next three years, while 91% are prioritising automation. 

“Our research reveals an urgent need for financial institutions to update legacy systems that are simply outpaced by modern financial crime,” said Diya Innab, Deputy CEO of Eastnets. “AI-powered platforms like Eastnets’ SafeTrade integrate complex data streams and enhance real-time detection, helping institutions stay agile, reduce risk, and remain competitive in an evolving market.” 

A key TBFC tactic is over-under pricing, where the declared value of goods is manipulated. SafeTrade leverages Generative AI and LLMs to analyse historical trade data and build accurate pricing models based on commodity, region, and transaction history.  

For example, if a shipment valued at $50,000 is flagged because the usual range for similar goods is between $70,000 and $90,000, SafeTrade immediately alerts the compliance team, enabling timely intervention and reducing the likelihood of undetected fraud. The platform further enhances efficiency by reducing false positives, cutting costs and streamlining operations. 

Eastnets’ platform aims to simplify and strengthen compliance efforts by unifying all workflows into one platform. Combining document digitisation, vessel tracking, transaction monitoring, and real-time compliance alerts, SafeTrade automates the labour-intensive process of trade document review using Optical Character Recognition (OCR) and Natural Language Processing (NLP). This automation is designed to reduce errors and delays while continuously monitoring transactions against ever-changing regulatory standards to keep institutions compliant and resilient in the face of emerging financial crime risks. 

 

90% of C-suite leaders say tax department is key to building stakeholder trust

A noteworthy 9 in 10 C-suite leaders now recognise their tax department as a pivotal contributor to enhancing trust among diverse stakeholders, according to the latest edition of the annual KPMG LLP report, ‘Tax Reimagined: Perspectives from the C-suite’. By using generative AI, harnessing data, and leaning into a third-party provider, corporate tax departments have the power to not only enhance transparency but also deliver unparalleled value to their organisations.

With numerous disruptions impacting the tax function, like economic fluctuations, geopolitical developments, and the advancement of generative AI, C-suite leaders are feeling immense pressure as they grapple with the challenge of staying one step ahead. 

To add to their list of concerns is what KPMG calls the ‘tax trifecta’: the impending expiration of the Tax Cuts and Jobs Act (TCJA) provisions in 2025 (the tax cliff), the enactment of the Organisation for Economic Co-operation and Development (OECD)'s global tax deal, and ongoing waves of regulatory change.

The fourth annual KPMG report surveyed 500 CEOs, CFOs and Chief Tax Officers and found that almost all (95%) agree the current environment in tax is more challenging to predict and plan for than ever before and that better-leveraging data from across the organisation will help their tax department see around the corner and influence smarter business decisions. Other findings include:

• 71% foresee the expiration of the Tax Cuts and Job Acts provisions at the end of 2025 to have a high or moderate impact on their business.
• 86% agree that generative AI tools will help supplement the talent needs in their tax department.
• 87% are becoming more willing to leverage a comprehensive managed services model for their tax function.
• 53% prefer to hire technology experts who can learn tax versus tax experts who can learn technology. Since 2021, the preference to hire technology experts who can learn tax has increased by 12 points.

 

Manufacturing new orders in China fall at fastest pace in two years

Operating conditions in China’s manufacturing sector deteriorated in September after improving during August. This was underpinned by a renewed downturn in new orders, including exports, which fell again. While manufacturers managed to keep production in expansion by working through their backlogs, optimism levels eased noticeably in the latest survey period. Furthermore, firms lowered their hiring and purchasing activity.

Turning to prices, the slowdown in demand led to a fall in average input prices, further contributing to reduced charges in September. Export charges also eased as competition intensified.

The headline seasonally adjusted Purchasing Managers’ IndexTM (PMI®) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – fell to 49.3 in September, down from 50.4 in August. Falling past the 50.0 neutral mark, the latest data signalled that conditions in the manufacturing sector deteriorated following a brief improvement in August. While marginal, the rate of decline was the fastest since July 2023.

Incoming new orders for Chinese manufactured goods declined at the fastest pace since September 2022, attributed to falling underlying demand, heightening competition and subdued market conditions, according to panellists. This included export orders, with softening economic conditions abroad negatively affecting foreign demand. Firms in the investment goods sector recorded the fastest fall in overall new work.

Chinese manufacturers nevertheless worked through existing orders to support production, though the rate at which output expanded eased to the joint slowest in the current sequence, matched only by July’s marginal pace. The volume of unfinished work also shrank for the first time since February.

In the services sector, expansion further slowed at the end of the third quarter of 2024. Incoming new business and activity increased only marginally in September, though export business growth accelerated to a solid pace. Capacity pressures were evident nonetheless as higher new business contributed to an accumulation of backlogged work and the hiring of additional staff.

However, the slowdown in growth led to a marked reduction in optimism levels among service providers. Firms were also reluctant to raise prices even as input costs inflation intensified.

The seasonally adjusted headline Caixin China General Services Business Activity Index posted 50.3 in September, down from 51.6 in August. This extended the period of expansion that commenced in January 2023, albeit with the rate of growth easing to the softest in a year.

New business inflows for services firms in China expanded for a twenty- first straight month in September as underlying demand conditions improved. New product launches were often mentioned as reasons supporting higher demand as well. That said, the rate of expansion decelerated to the slowest in nearly a year. That was despite a solid expansion of export business. Anecdotal evidence suggested that a widening of sales channels and marketing efforts enabled exporters to bring in higher foreign orders.

Backlogs increased for a second successive monthly as a result of rising new work inflows. Firms therefore hired additional staff to cope with ongoing workloads. While marginal, the latest rise in employment marked only the third rise in staffing levels in the past eight months.

 

AI stocks aren’t in a bubble - Goldman Sachs Research

The soaring performance of a handful of tech stocks has prompted investors to ask if AI stocks are in a bubble. But a note from Peter Oppenheimer, Goldman Sachs Research's chief global equity strategist and head of macro research in Europe, says that, despite their meteoric rise, these companies aren't caught up in a bubble. But that shouldn't stop investors from diversifying, particularly to other sectors that will enjoy AI-related benefits.

The technology sector has generated 32% of the global equity returns and 40% of the US equity market returns since 2010. Oppenheimer says this comes down to stronger financial fundamentals rather than irrational market speculation. The global tech sector's earnings per share have risen about 400% from its peak before the great financial crisis, while all other sectors together have risen 25% during that span.

That said, the unusual concentration of market capitalisation among a few companies is unusual and is a risk to investors. “With markets being increasingly dependent on the fortunes of so few, the collateral damage of stock-specific mistakes is likely to be particularly high,” Oppenheimer writes. He points out that there are plenty of companies outside the tech sector that have high margins and returns on investment, that reinvest for future growth, and that have strong balance sheets.

Healthcare and biotech companies, meanwhile, are also likely to benefit from AI innovation. Likewise, banks and financial companies may be able to improve their return on equity by adopting AI. New consumer products and services are likely to emerge, eventually, on the back of these technologies. There are signs that AI will provide better cybersecurity and allow for the development of much more sophisticated robotics.

 

Deutsche Bank helps China’s Ministry of Finance to issue €2bn in sovereign bonds

Deutsche Bank has again helped China’s Ministry of Finance (MoF) to price a €2bn euro International Sovereign Bond issuance, with a three and seven-year tranche. Deutsche Bank acted as Joint Lead Manager and Bookrunner on this transaction.

This issuance sees China’s return to the euro bond market, after its last issuance in 2021, this time setting a new pricing benchmark for Chinese corporate offshore bond issuances. This is also Deutsche Bank’s ninth consecutive international sovereign bond mandate from MoF since 2017.

The bond was 8.1 times oversubscribed, catching the attention of a diverse pool of global investors including central banks, sovereign wealth managers and multilateral institutions and development banks across developed and emerging markets, as well as European fund managers.

Deutsche Bank has been actively supporting the continuous opening-up of the capital markets in China. The bank says it is fully committed to contributing to RMB internationalisation through its active participation in both onshore and offshore markets.

“We are proud to facilitate MoF issuing its first benchmark-setting offshore sovereign in recent years and improve the Euro yield curve for the China sovereign,” said Rose Zhu, China Chief Country Officer, Deutsche Bank. “This is another testimony to the attractiveness of China’s assets to international investors and a demonstration of China’s economic resilience.

 

Kriya becomes Stripe’s first PayLater solution for B2B merchants in the UK

Kriya, a B2B PayLater payments solution, is now available on Stripe, a financial infrastructure platform for businesses. Starting this month, Stripe users can offer flexible payment terms to their business buyers through Kriya.

B2B commerce is digitising rapidly, and business buyers now expect to purchase with the ease and sophistication commonplace in consumer shopping. B2B PayLater payment methods (also known as B2B Buy Now, Pay Later), such as Kriya, are gaining adoption by combining flexible payment terms with modern e-commerce shopping. Kriya’s new integration brings these capabilities to B2B merchants using Stripe in the UK for the first time.

Businesses on Stripe can use Kriya to grow the volume and frequency of sales, and get paid upfront once goods have been delivered. By selecting Kriya at checkout, buyers can defer payment by 30 days, helping them manage their cash flow and incentivising them to spend more. Kriya makes this possible by onboarding buyers in real-time, providing them with an instant spending limit, and protecting the seller from credit and fraud risk.