Over a quarter of global firms bled more than £1m to financial crime in 2020

A recent whitepaper by KYC and AML software providers Themis and Encompass Corporation has found financial services’ companies worldwide lost over £1m due to financial crime deficiencies last year.

The whitepaper – titled Financial Crime Compliance: The cost of Getting it Wrong – examined recent case studies and 2020 polling from Themis and targeted professionals across financial services.

The report found that direct financial loss was viewed as the primary concern of financial crime for up to 36% of respondents, while 32% cited reputational damage and the associated customer loss as their biggest cause of concern. A further 15% said that follow-up regulatory fines played heavy of the mind for them.

However, the whitepaper emphasised that regulatory fines currently pose the most clear, immediate and severe impact to the balance sheet of companies.

The joint paper also sought to draw attention to a previous study that found corporate reputation accounts for up to one third of stock market valuations. Because of this, Themis conducted an analysis of a sample of the most substantial international AML shortcoming stories since the study was conducted in 2019. This new study found that across seven banks, the average share price loss one day after the regulatory probe was announced was 5.15% falling to 20.71% six months following the announcement.

Encompass Corporation global head of industry and regulatory affairs Henry Balani said, “Clearly, many finance professionals still perceive a ‘criminals’ take’ as the biggest cause for monetary loss year after year. However, this is not necessarily true, and increasing regulatory impositions combined with the increasing importance of corporate reputation, means there are far more hidden costs than to financial non-compliance, than one might initially realise.

“In 2021, there is no excuse to not have the correct regulatory technology in place, to help automate laborious compliance processes, and improve the efficiency and effectiveness of catching financial crime. All too often are finance professionals caught out, not for knowingly endorsing financial crime, but for not knowing it is going on right under their noses. Personal reputations and careers within the financial services sector may suffer as a result.”

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