Board should set the tone to fight financial crimes, says Anurag Jain

Companies must undertake a range of formal compliance procedures in relation to customers, third-party vendors, suppliers or partner relationships, he says

A first-time survey of Thomson Reuters around 2,300 senior managers from large organisations around 19 countries finds that corporate India does not fare well when it comes to assessing the impact financial crimes on their business. Anurag Jain, head of Thomson Reuters Risk Business in India, tells Sudipto Dey why Indian businesses need to go beyond their 'tick-the-box approach' in meeting regulatory compliances. Edited excerpts: 

What was the key trigger for a survey on the cost of financial crimes?

The scale of financial crimes and the toll that it takes on businesses, as well as the society is enormous. Very few of us are aware that financial crimes transcend beyond pure economics and contributes hugely to societal evils such as terrorism, corruption, trafficking and slavery. The Global Estimates of Modern Slavery, produced by the Walk Free Foundation and the International Labour Organisation, estimates that over 40 million people are in modern slavery. According to the Walk Free Foundation’s 2016 Global Slavery Index, five countries – India, China, Pakistan, Bangladesh and Uzbekistan – are responsible for nearly 60 per cent of modern slavery globally.

Today’s financial criminals are more sophisticated and savvy in how they leverage technology to launder money across global financial systems. We hope the report will help corporations look at financial crimes as more than just compliance imperative.

How do you assess corporate India’s awareness level about financial crimes?

Global Indian corporations are more aware of the economic and reputational impact of financial crimes, as compared to Indian organisations catering for the domestic market. This is largely because of international regulatory enforcement agencies, which have enacted stringent laws and imposed penalties for non-compliance. 

The ‘tick-in-the-box’ approach adopted by organisations indicates lack of awareness about the societal and humanitarian impact of financial crimes, as is validated by the survey.  

What makes Indian businesses more vulnerable to such criminal acts?

Perpetrators of financial crimes often ‘hide’ in organisations’ external relationships (customers and third-party vendors) that are often extensive and can span across the globe. According to the report, the average number of external relationships that Indian companies have is 12,224, significantly more than the global average of 7,693. The extreme pressure to increase turnover coupled with a host of global regulations and legislation to combat financial crimes has led compliance teams to struggle to fully screen and monitor the vast number of customers, third-party vendors, suppliers and partners. 

In India, fewer than 40 per cent of external relationships are fully screened at the onboarding stage. Lack of awareness, inadequate systems and unavailability of reliable data leave Indian businesses vulnerable.

What should businesses focus on to mitigate the risks attached to such crimes?

Companies must undertake a range of formal compliance procedures in relation to customers, third-party vendors, suppliers or partner relationships. The tone for this has to be set by leaders at the board level which needs to percolate down to the entire organisation. Currently, only 59 per cent of the surveyed Indian corporations fully monitor third-party networks and refresh their customer data. 

Advances in technology around big data and analytics can help businesses connect the dots and fight financial crimes. The technology must screen and classify risks, allow users to conduct due-diligence on an on-going basis, monitor and refresh customer data continuously and generate reports on suspicious activities.  Organisations must also include a comprehensive round-the-year training programme for their employees and external partners.

What more could businesses do to increase awareness about the adverse impact of such crimes?
 

Today, crime tech is truly global in nature and an effective fight against it would require strong international collaboration between sovereigns, specialised agencies, regulators, network operators and organisations. Numerous initiatives taken by the government indicate the intent to sincerely combat financial crimes. 

There is a strong need for government agencies, industry bodies, associations and fora to come together to raise awareness and educate businesses about the impact of financial crimes — both economic and societal.