Financial institutions brace for increased financial crime plus a wave of compliance hires

Financial institutions worldwide are preparing for a rise in financial crime in 2023, with 58 percent planning to hire more staff, according to leading financial crime and fraud risk detection firm ComplyAdvantage.

The key findings from ComplyAdvantage’s “State of Financial Crime 2023” survey, which polled 800 C-suite and senior compliance decision-makers, include:

• 99 percent of compliance teams are re-evaluating their firms’ risk appetites. This is likely to lead to “de-risking,” making it harder for consumers and businesses to access financial products like loans.
• 59 percent of financial institutions expect an increase in financial crime due to the uncertain global economic environment.
• The war in Ukraine has resulted in 53 percent of firms changing their business models.
• 87 percent of firms said they’d seen an increase in the use of decentralised finance platforms – such as crowdfunding – to fund extremist political groups.

All respondents currently work in financial services, with 50+ employees and total assets of over $5 billion. Those who responded to the in-depth survey are represented by the following sectors: financial institutions (e.g. banks), wealth and investment management, capital markets, money service businesses, crypto exchanges, and insurance.

Commenting on the results, Andrew Davies (pictured), Global Head of Regulatory Affairs at ComplyAdvantage said, “2023 was supposed to be the year compliance professionals escaped the shockwaves of the COVID-19 pandemic. It’s clear from this year’s survey that won’t be the case. With financial crime rising overall – and new risks emerging from platforms like crowdfunding – financial institutions will need a dynamic, data-driven strategy to succeed in 2023.”

Davies also said, “Our survey also shows the already hot compliance job market is about to get hotter. Existing firms are trying to hire more staff. More companies will fall under anti-money laundering regulations, and the potential rise of “super apps” from firms like Snap and Twitter that incorporate financial services will drive yet more demand. As a result, many teams may struggle to retain their current talent and hire the incremental staff needed to combat financial crime.”

Cyber, fraud, and environmental crime are top concerns  

For the second consecutive year, cybercrime was the primary offence compliance teams were focused on screening against, cited by 43 percent of respondents. 34 percent of respondents chose fraud, with investment scams and tax fraud at the top of the list. Environmental crime was highlighted by 27 percent of teams, featuring higher than corruption, arms tracking, and insider trading.

Data transformation a top priority for 2023 

The survey also indicated that more compliance teams intend to embark on digital transformation initiatives. 39 percent of firms said digitally transforming legacy systems was their most significant compliance-related pain point, a two percentage point increase on 2021 and 6 percentage points higher than in 2020. Firms also cited “data relevancy” as a critical challenge. 38 percent of firms said data being stored in the correct categories was their organisation’s most significant pain point alongside global data compilation.

The “State of Financial Crime” report is published annually by ComplyAdvantage, the global financial industry’s leading source of AI-driven financial crime risk and fraud detection technology. More than 1000 enterprises in 75 countries rely on ComplyAdvantage to understand the risk of who they’re doing business with through the world’s only global, real-time database of people and companies. The company identifies thousands of risk events daily from millions of structured and unstructured data points.