69% of global companies predict financial crime risk will rise in the next year, according to the annual Kroll survey of bribery and corruption risk

A new survey of global executives shows that companies expect the risk of financial crime and regulatory enforcement action to rise in the next year. Firms are also prioritizing technology as a means to improving their compliance and due diligence approach. We look at what firms can learn from this report, and how Nexis^® Solutions can help firms to leverage data and technology to transform their financial crime risk management.

The main trends companies predict in financial crime compliance in 2023-24

The Kroll Fraud and Financial Crime Report comes out every year to capture the main trends and priorities of companies in relation to financial crime compliance. The 2023 report is based on surveys carried out in the first three months of 2023 with 400 executives and risk management professionals in companies across the US, UK, France, Germany, Brazil, Mexico, Singapore and the United Arab Emirates.

The key trends identified from the survey responses include:

• Rising financial crime: 69% of interviewees expect financial crime risks to increase over the next 12 months. The report’s authors said that, in light of this, “the role of the compliance function remains more crucial than ever”.
• Growing enforcement: 64% of respondents predicted that regulators will step up the number and frequency of enforcement actions over the next year. Most of those respondents cited “third-party gatekeepers” as a key driver of escalating financial crime risk.
• Corporate transparency on the agenda: 61% of firms expect regulators to increase the requirements for companies to be transparent within the next year. Firms are increasingly expected to declare their beneficial owners, and to identify (and disclose where appropriate) the beneficial ownership of their third parties and clients.
• Cooperation between regulators and financial institutions: 52% of respondents observed that regulators are looking to cooperate with financial institutions on anti-bribery and corruption initiatives.

The report also highlights that sanctions regimes are currently posing a “significant challenge” to companies, particularly multinationals and banks. In the last year, extensive sanctions have been imposed on–and by–Russia, as well as other high-risk jurisdictions like North Korea. It is therefore unsurprising that the report identified “immense financial and reputational consequences” for companies who fail to comply with sanctions changes. 44% of respondents said that geographic consistency of sanctions regimes posed the main challenge around sanctions compliance, while 34% said they are struggling to stay on top of changing regulations, and 33% said they find it challenging to access technology to support sanctions screening.

Investing in technology is key for anti-financial crime investigations and compliance

The growing importance of technology in compliance was a major theme to come out of the responses to Kroll’s report. Company executives surveyed predicted that regulators will “start looking more closely” at how firms are using technology in their anti-money laundering compliance programs.

Companies therefore see it as a priority to scale up the way they use technology to support compliance. More than two-thirds of respondents to the survey said they are “prioritizing” investments in tech. Most respondents also expressed doubts about the capacity of governments to keep pace with technological change, which reinforces the need for companies to embrace technology themselves to better detect risks.

How companies can respond to rising financial crime risks

Two main lessons emerge from the Kroll report’s findings. The first is that companies should embed technology into their compliance processes. Machine Learning and AI can indicate patterns of suspicious activity which could warrant further investigation or a report to the regulator. Other technology platforms allow firms to surface relevant risks and insights from high volumes of data more efficiently and effectively than humans can.

The second lesson is to prioritize data as a tool for compliance. The advanced technologies discussed above are only as good as the data powering them. Firms should review a wide range of authoritative data sources to capture the full picture of risks around a third party or customer–from transaction monitoring and financial health data, through to news and ESG data.

Upgrade your approach to risk management and due diligence with help from Nexis^® Solutions

Nexis Solutions helps firms to implement a more efficient and effective due diligence process to identify and mitigate financial crime risks by providing companies with authoritative data from the most relevant sources, including:

• News data to identify reputational risks of third parties.
• PEPs and sanctions data to identify third parties which may require enhanced due diligence.
• Company data to help to build a picture of a third party company’s structure, directors and beneficial owners.
• ESG data to assess third parties’ compliance with growing expectations from regulators and the public around human rights and environmental due diligence.

We support firms to deploy technology across these sources to improve their approach to due diligence and risk management. For example:

• Nexis Diligence supports an effective due diligence process with our extensive archives and news searches going back more than 40 years.
• Nexis^® Data as a Service delivers an unrivalled collection of licensed and web content, deep archives and data, through our flexible data APIs.