Financial crimes have been a constant source of concern for decades with several regulatory bodies set up to curtail their activities. According to statistics, criminals launder between $800 million and $2 trillion each year. Despite efforts and laws put in place so far, financial crimes persist today, motivated by several reasons, including corruption and economic benefits.


Fortunately, new laws and regulatory requirements are being passed to constantly stay ahead of the evolving financial crime tactics. Compliance bodies and governments have introduced Financial Crime Compliance (FCC) measures to counter criminal activities. 

From businesses risking their reputation and heavy fines to individuals who may be robbed of their hard-earned money, every member of the global economy faces a challenging task to overcome this threat. 

Businesses have a major role to play by adhering to compliance laws and applying other reasonable measures or risk a negative impact on their reputation and financial penalties. This article discusses financial crime compliance, its importance, and the role institutions play in adhering to it to reduce the overall global financial crime rate.

What is Financial Crime? 


Financial crimes simply refer to illicit acts against financial institutions or an individual. Although it can be monetary, regulatory or reputational, the major purpose remains to defraud, steal or circumvent regulations.

Financial crime is a broad category that covers a variety of criminal activities including financial crimes, tax evasion, bribery, and aiding and abetting criminal enterprises. When financial crimes are perpetuated, it is often regarded as a compliance case.

Failure to establish robust anti-money laundering structures may result in significant losses for the form, coupled with hefty fines from regulatory bodies and negative media news. 

Who Commits Financial Crime?


The following are the category of individuals or business entities that commits financial crimes:


  • Criminal syndicates like terrorist groups who commit large-scale frauds to fund their operations.
  • Persons in high authority positions like leaders of states who loot their country's finances
  • External fraudsters who collaborate with employees to commit fraud within an institution to make more profit
  • Employees at different levels of positions within a company who embezzles funds
  • Criminals who target an organisation from outside such as contractors, customers, and supplies. These individuals usually have no connection with the organisation. 

What are Some Examples of Financial Crimes?


Common examples of financial crimes include: 


  • Identity theft
  • Money laundering 
  • Forgery 
  • Financial fraud
  • EMbezzlement
  • Terrorist financing
  • Tax evasion 
  • Insider trading and market abuse
  • Electronic fraud
  • Bribery and corruption

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What are the Top 3 Financial Crimes?


The top 3 financial crimes are: 


  • Money laundering 
  • Tax evasion 
  • Embezzlement


What is Financial Crime Compliance?  


Financial crime compliance refers to the precautions and strategies adopted to effectively curtail, identify and report criminal financial activities. The strategy cuts across several processes, which all have a single goal of identifying and reporting criminal acts or those trying to hide or benefit from them.

Several laws guide financial crime compliance with global and regional requirements based on a business’s jurisdiction. It is imperative that you understand the laws that directly affect you. Some of the mandatory activities that aids businesses in achieving financial crime compliance include:

  • Know Your Customer (KYC) - this verifies the identity of the customer for risk analysis and to ensure they are legit.
  • Watchlist Screening - This mandates the constant monitoring and screening of clients against relevant sanction lists
  • Anti Money laundering (AML) - Anti-money laundering structure prevents illegal cash from entering the legit financial system.
  • Prevention of financial fraud - this puts structures in place to adapt to and protect a business from money laundering with minimal operation flow.

Ultimately, transaction monitoring is important to achieve financial crime compliance as the legal requirements and operational scope of criminals are constantly evolving.

Read Also - Types of Financial Crimes


What is Financial Crime Risk Management (FCRM)?


Financial Crime Risk Management (FCRM) refers to the process of taking a risk approach by balancing the risk level with corresponding management controls to limit the possibility of occurrence or damages that may result from financial crimes. 

Basically, FCRM speaks to:


  • Understanding the general environment and its respective risks
  • Identifying and reporting suspicious activities 
  • Educating staff on risk policies 
  • Performing reasonable customer due diligence for users during onboarding for adequate risk assessment
  • Developing and implementing policies to guide against and handle risks
  • Monitor transactions
  • Audit new processes to identify deficiencies 

Most Financial crime risk management actions are too tedious to carry out manually. Digital automated tools are preferred as they simplify the process while saving cost, labour and time.  


What are the 3 Phases of Financial Crime Risk?


The three major phases of financial crime risk are:

1. Risk Prevention


This is the very first stage in the financial crime risk life cycle. Its purpose is to deal with potential threats that have not yet affected the institution. A good example is scanning for high-risk and suspicious processes in a company and putting them to a halt. 

Several resources are put into place to achieve this and reasonable customer due diligence is a crucial step in achieving the prevention of risk. 


2. Risk Detection


Risk detection is the next phase of the financial crime risk process. It involves identifying and dealing with threats that may or may not be active. Risk detection requires a great deal of speed and accuracy, as a few seconds can mean the difference between ending a criminal activity or breaking AML laws and getting slapped with fines. 

This is why the process is best carried out using intelligent AI that is able to profile, verify, and monitor customer patterns for irregularities and flag them on the spot.   


3. Risk Investigation


This is the final stage of a financial crime risk and it comes into play after a risk has been successfully identified. Although often ignored by most institutions, risk investigation is what actually puts the actual risk to bed after the prevention and detection have been carried out. Basically, it resolves the risk.  

What do Regulators Look out for When they Examine an Institution?


Regulators look out for the following when examining an institution:


  • Its overall compliance structure including the operational procedures, reporting channels and line of action.
  • The organisation’s management commitment to a compliance structure throughout the institution.
  • The key risk indicators and metrics which are reported to the executive leadership and board of directions as proof of compliance.
  • Board members’ dedication to compliance and how they go about finding the root cause and evaluating cases.
  • How often the compliance leaders assess the compliance culture of the organisation.

Achieving Financial Crime Compliance With Youverify


We believe in achieving financial crime compliance without giving up on important stats like user onboarding time, rate and drop-off. However, this process can be expensive, resource-intensive and time-consuming when performed manually and we have developed the perfect solution using artificial intelligence.

With our flagship solution, the Youverify OS, we have created an automatable process, allowing you to customize your compliance workflow to suit relevant regulatory laws. This will help save time, cost and resources while bettering user onboarding rate and the overall customer journey for a more positive experience while satisfying compliance.  

 See how 100+ leading companies use YV OS for Financial Crime Compliance and real-time risk detection. Request a demo today.