The news: Sanctions compliance, money laundering crackdowns, and technology regulations are on the minds of financial executives for 2023, according to ComplyAdvantage’s annual report, The State of Financial Crime.
The report surveyed 800 C-suite and senior compliance decision-makers in the US, Canada, UK, French, Germany, Netherlands, Singapore, Hong Kong, and Australia.
Economic uncertainty is changing attitudes toward risk: Geopolitical tensions, a cost-of-living crisis, and a looming recession are just a few of the reasons behind financial heads doubling down on their risk mitigation efforts in 2023.
A defining moment for sanctions compliance: The conflict in Ukraine has put the use of sanctions at the forefront of many global financial institutions' priorities.
The implementation of sanctions compliance processes will lead the way for responding to similar future crises. Mounting concerns around an Iran nuclear deal, increased missile tests in North Korea, and political tensions in China might result in the need for stronger sanctions compliance, and banks must be prepared to implement related changes quickly.
Criminals use new technology to launder money: Related to sanctions compliance, anti-money laundering controls are vital to keep up with new methods that bad actors use to hide illegal profits. New technologies, such as digital currencies and blockchain-based transactions, are ripe with criminal activities that go undetected as financial institutions face hurdles implementing the appropriate controls.
Financial regulators are expected to increase enforcement of AML compliance and crack down on financial institutions that fail to implement proper controls. But the survey revealed that fines aren’t enough to promote compliance.
Technology transforms, but needs to be regulated: Financial institutions have recently embarked on major digital transformations, many of which were accelerated by the pandemic. But the new technology and partnerships that power these transformations require regulations, frameworks, and guidelines to ensure consumer and business safety.
Digital assets are also breaking into the mainstream, but the recent fallout of the crypto markets is highlighting the need for a framework regarding digital asset development and use.
The big takeaway: Quickly changing economic conditions and continuously developing technologies are pushing financial institutions to increase their vigilance over financial crimes. Regulators will always play a role in ensuring banks remain compliant with rules designed to protect consumers and promote a safe financial system—but sometimes regulations will be slow to adapt to the ever-evolving environment. Financial institutions must take the initiative in preventing financial crime to ensure their risk controls are effective.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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