Compliance – one of the weapons in the fight against financial crime

In recent years, the global financial landscape has been increasingly threatened by the proliferation of financial crime, including money laundering, terrorist financing and fraud. As a result, regulatory authorities and financial institutions are under mounting pressure to bolster their efforts to combat these illicit activities. In this challenging environment the role of compliance has emerged as a critical weapon in the fight against financial crime.

“Financial Crime Continues to Be a Leading Threat Globally - Sixty-nine percent of global executives and risk professionals surveyed expect financial crime risks to increase over the next 12 months with cybersecurity and data breaches as the primary drivers, followed by financial pressures on organizations. In the face of this dynamically evolving landscape, the role of the compliance function remains more crucial than ever.” – KROLL 2023 Fraud and Financial Crime Report

To put this into perspective, let’s look at the top 3 financial crimes in the last year (Skillcast- Biggest AML Fines of 2023 )

1)     Binance – $4.3 Billion Fine – after admitting they had engaged in money laundering, unlicensed money transmitting and sanctions violations.

2)     Crown Resorts - $450 Million Fine – after breaches in Australian Anti Money Laundering laws in its casinos were found.

3)     Deutsche Bank - $186 Million Fine – in relation to its inadequate efforts in addressing money laundering control issues.

A robust compliance framework would have ensured at the very least, that the risks were accounted for, mitigated, and controlled. Compliance serves as the first line of defence for financial institutions in detecting and preventing financial crime.

 By adhering to stringent regulatory requirements and industry best practices, compliance professionals play a pivotal role in safeguarding the integrity of the financial system and protecting institutions from the reputational and financial risks associated with illicit activities.

In the fight against financial crime, collaboration and innovation are paramount. By fostering a culture of information sharing and cooperation, the industry can enhance its collective ability to detect and disrupt criminal activities.

Moreover, technological advancement has transformed the landscape of compliance. The integration of artificial intelligence, machine learning and blockchain technologies have empowered compliance teams to harness the power of big data and automation in their efforts to combat financial crime. These technological advancements enable more efficient monitoring, detection, and reporting of suspicious activities, thereby strengthening the overall effectiveness of compliance programmes. We are now able to effectively streamline processes, providing real time returns and alerts in a world that is just as fast paced.

While the role of compliance in the fight against financial crime is undeniable, significant challenges persist. The ever-changing nature of financial crime demands continuous adaptation and evolution of compliance frameworks to keep pace with emerging threats. Additionally, the increasing complexity of global regulations and the rising costs of compliance pose formidable challenges for financial institutions. It is essential to keep pace with the evolving landscape of financial crime, particularly with the rise of identity theft. In the context of AML CFT criminals have developed sophisticated techniques, necessitating a similar level of sophistication in compliance efforts to effectively combat these activities.

Thus, this presents opportunities for innovation and collaboration. By embracing technological advancements and fostering a culture of vigilance and integrity, financial institutions can enhance their capabilities to detect and prevent financial crime, ultimately safeguarding the integrity of the global financial system via their compliance framework.

Compliance functions continue to demonstrate the ability to adapt, embrace change and evolve in response. Notably there has been an increase in the availability of compliance software equipped with enhanced security measures as well as advancements in regulatory oversight. It is imperative that compliance continues to assimilate these advancements to stay ahead.  

In conclusion, compliance stands as a formidable weapon in the ongoing battle against financial crime. By upholding the highest standards of integrity, diligence and innovation, compliance professionals play a crucial role in safeguarding the financial industry and upholding the principles of transparency and accountability. Through continued collaboration and a commitment to staying ahead of emerging threats, the industry can strengthen its collective resilience against financial crime and protect the interests of stakeholders worldwide.