Nearly half of companies fall prey to financial crime
Almost one out of two large global companies experienced some form of fraud, theft, money laundering or other financial crime in the past year, according to a new report.
The report, from Thomson Reuters surveyed more than 2,300 senior business leaders and found that 47 percent of them admitted their organization had experienced at least one incident of financial crime in the past 12 months. The respondents cited cybercrime and fraud as the most common financial crimes. The companies estimated a total aggregated loss of $1.45 trillion, or approximately 3.5 percent of their global turnover.
The report also looked at the risk of fraud at third party vendors, but found that only 36 percent of relationships are regularly screened for criminal connections. The survey suggests that 41 percent of the parties the survey respondents did business with over the past 12 months weren’t screened at all.
The survey respondents admitted that 41 percent of known instances of financial crime are not reported, either internally or externally, by their organization. The reasons cited include 69 percent of detected bribery and corruption involved someone internal to the organization, 55 percent of privately owned companies worried about reputational damage and financial loss, and 60 percent of publicly listed companies were concerned there would be a significant negative impact on investor confidence if such crimes came to light.
However, the impact of financial crime can extend well beyond big companies. For example, 46 percent of the survey respondents believe money laundering can lead to higher prices for consumers, while 42 percent think it leads to lower government revenues. Financial crime has also been tied to modern-day slavery in some parts of the world.
“Financial crime causes incalculable harm around the world,” said Phil Cotter, managing director of risk at Thomson Reuters, in a statement. “The proceeds of bribery, corruption, fraud, narcotics trafficking and other organized crime have all been implicated in the financing of terrorism, human rights abuses such as slavery and child labor, and environmental crime. This has serious economic and social costs in terms of the lost revenues to national exchequers that could be invested in social development, and in terms of the impact on individual lives.”
The survey respondents point to greater collaboration as an important factor in combatting financial crime, with 94 percent indicating there should be more sharing of financial crime intelligence, while 93 percent said public-private partnerships should increase and improve.