A majority of nearly 3,000 risk managers admit that the pandemic has led to more careless due diligence checks and a more sloppy handling of the Know Your Customer (KYC) principle. In addition, 71 per cent of respondents report that cybercrime is harder to contain because of remote working.
This is evident from the Global Risk and Compliance Report 2021 by Refinitiv, the British-American provider of financial market data. The survey of 2,920 risk managers from large organisations reveals that companies are still under pressure from the Covid-19 pandemic and that broken supply chains are slow to recover.
As a result, organisations are focusing less and less on risks from and by third parties. The result is that the opportunities for criminals to defraud consumers and businesses are increasing, according to these surveyed managers.
The survey of nearly 3,000 managers of large organisations focused on employees involved in compliance and business and intake processes. According to Refinitiv, the poll shows that the pandemic has significantly increased the risks for customers and third parties.
Participants argue that financial crime undermines the business environment, poses significant reputational and compliance risks, and degrades the efficient use of production resources.
Cutting corners
Of the respondents, 65 per cent agreed that the pandemic has caused more sloppy due diligence checks and sloppy handling of the Know Your Customer (KYC) principle. 71 percent of respondents reported that cybercrime is harder to contain because of remote working. 62 percent of respondents said they were aware of financial crime in the past 12 months. By comparison, that was still 72 per cent in 2019.
While Covid-19 has been highly disruptive, the report also shows that gaps in compliance were a persistent problem long before the pandemic. In 2019, 49 per cent of third-party relationships were subject to due diligence checks; by 2021, that figure had dropped to 44 per cent.
Technology is the answer
Of the respondents, 86 per cent said they use or will use technology in the fight against fraud. Interestingly, 45 per cent of those who do not use technology to combat financial crime say they have not detected any cases of crime in the past 12 months. This figure drops to 21 per cent for those who do use technology in this fight.
The use of technology appears not only to improve current processes, but also to speed up future implementation. 91 per cent of respondents who use technology for KYC compliance want to improve the detection and mitigation of financial crime in the next 12 months, compared to 71 per cent of those who do not currently use technology.