Battling the 2023 financial crime landscape

The escalation in compliance failures associated with managing financial crime risks has accentuated the need for regulated businesses to bolster their strategies. The evolution of the risk landscape, marked by the increasing sophistication of criminal networks employing innovative money laundering techniques, raises the stakes for regulatory compliance in 2023.

Arctic Intelligence, an Australia-based RegTech platform, has outlined the biggest trends of 2023 in compliance. 

A significant trend this year involves the escalation in fines and penalties levied for breaches of financial crime laws.

A study by Fenergo revealed that global fines for compliance failures in preventing money laundering and related financial crimes rose by over 50% in the previous year. This surge, which brought the total fines since the financial crisis to nearly $55bn, points to the need for stricter regulation of financial crime, such as anti-money laundering (AML), tax evasion, bribery, and corruption.

The second trend outlined by Arctic Intelligence was increased public awareness and media attention towards financial crime. In the past, the extent of financial crime and its societal impact were often overlooked. However, this perception has been changing. In Australia, a national educational campaign launched by AUSTRAC is raising awareness on the risks of money laundering within local communities.

Advancements in technology present a paradoxical challenge. The COVID-induced shift towards digitalisation in financial services, while beneficial for many customers, introduces vulnerabilities due to increased anonymity. Moreover, tech-savvy criminals exploit emerging technologies to perpetrate scams and illicit money transfers. However, the rise of RegTech is mitigating these risks, supporting businesses in managing their financial crime exposures.

As we move further into 2023, expect a surge in RegTech solutions to counter financial crime risks, it said. These sophisticated platforms offer real-time reporting and analytics, detailed audit trails, and improved decision-making capabilities, arming businesses against evolving threats.

Recessionary impacts will force businesses to leverage their human resources strategically, turning increasingly towards automation and technology to meet their compliance obligations.

Expect a faster pace of regulatory changes this year. As global threats of financial crime rise and criminals become more adept, regulatory bodies and individual countries are likely to accelerate their responses through new legislations and guidelines.

Greater information sharing and collaboration among global anti-financial crime initiatives also emerges as a trend. AUSTRAC’s Fintel Alliance in Australia exemplifies this by bringing together a diverse set of organisations in the fight against money laundering and other serious financial crimes.

Accountability for compliance failures is set to become more personal. Executives and CEOs can no longer evade liability for non-compliance with financial crime regulations. Expect regulators to hold financial services firms accountable for reimbursing customers who fall prey to financial crime.

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