What’s the true cost of financial crime? That’s the question addressed by consulting firm Themis Insight in a new briefing note on how to tackle the problems of crime in the finance sector, and financial crimes in all types of business.

To do so means understanding that financial crime has a much larger context than many might imagine. The document says:

“It is all too easy to think of financial crime as an issue that affects an anonymous system – big banks, complex corporate structures, globalised money flows. However, it is much closer to home than we may think.

“It devastates organisations whose data is leaked in massive hacking operations, pensioners who are scammed of their life savings, and managers who are held personally accountable for their employees’ malpractice.

“It is a threat to individuals, organisations and societies, and its mitigation and prevention should, therefore, be a top priority.”

However, financial crime is not just about simple fraud, scams, or theft – serious though those issues remain. It also encompasses:

  • Environmental crime, which includes illegal logging, mining, fishing, waste disposal, and wildlife trafficking – issues that, collectively, the United Nations estimated in 2016 were worth up to $258 billion a year, and yet are rarely investigated.
  • Modern slavery and human trafficking, which currently affects over 40 million people worldwide, with $150 billion a year lost globally to criminal organisations from widespread human rights abuses.

Working with the Independent Anti-Slavery Commissioner, Themis Insight notes, “Banking services are used by both the perpetrators and victims of modern slavery and human trafficking (MSHT).

“Any proceeds generated by MSHT and channelled through banking systems, will fall into the category of criminal property and are classed as money laundering.”

As a result, monitoring for MSHT-related red flags must be an integral element in any institution’s financial crime controls system, says the report.

  • Governance. State-level corruption hits public institutions and reduces trust in their effectiveness, while tax evasion creates an “endless cycle of exploitation”, as less money is available for public projects, perpetuating poverty and illiteracy and creating further crime.
  • Internal impacts: Financial crime hits organisations at their core. In a Q1 2020 corporate survey by the firm, a third of respondents estimated that the direct and indirect costs of financial crime to their business had been over £100,000 in the previous 12 months, while nearly one-quarter said that it had been £1 million or more.

Losses include the criminals’ ‘take’, but also fines for breaches of financial and other regulations – not to mention reputational damage.

Companies that fail to tackle these problems risk indirectly facilitating criminal activity, issues that will have lasting professional impacts on senior managers.

Business leaders need to be proactive, seek out training, and focus on the organisation’s strategic, operational, and benchmarking capabilities, concludes the report.