MENA businesses expect higher spending to fight financial crime: EY

Published November 8th, 2015 - 10:00 GMT
Keeping levels of diligence high can keep regional banks competitive and accessible to international finance systems. (Shutterstock)
Keeping levels of diligence high can keep regional banks competitive and accessible to international finance systems. (Shutterstock)

Almost seven out of 10 (68%) of MENA business leaders and senior compliance specialists expect to spend significantly more on sanctions and financial crime compliance over the next 12 to 18 months.

The findings come as financial crime challenges and risks become more significant across the MENA region, with an even greater number (74%) predicting that MENA businesses are set for a significant increase in compliance risk scrutiny from global banks and regulators.

The findings were revealed during EY MENA’s Sanctions and Financial Crime Symposium held recently, to increase awareness on key issues including the importance of robust compliance in relation to combatting illicit finance.

300 business leaders, compliance professionals and industry experts were present at the event and took part in an exclusive poll.

Findings also revealed that 63% expect interaction with global correspondent banks relating to sanctions and financial crime matters to be significantly more over the same time period.

The majority of business representatives present at the event (64%) said their organization had conducted a sanctions and financial crime risk assessment within the last year, although 20% said their organization had never undertaken such an exercise.

Michael Adlem, MENA Fraud Investigation & Dispute Services Leader, EY, said:  “The results of our exclusive poll show that never before have financial crime challenges and risks been greater across the MENA region.

There is a significant awareness of an increased level of scrutiny across the MENA region from regulators and banks – and this level will further increase over the next 12 to 18 months. As a result, businesses are prepared to put the resources needed into ensuring their compliance standards are up to scratch.

Raising awareness on key issues such as financial crime, sanctions, money laundering, illicit finance, and other risk management challenges will help businesses in the region to be better equipped to manage the sanctions and financial crime risks.”

Speakers at the event included John Smith, Acting Director of the Office of Foreign Assets Control (OFAC) and Adam Szubin, Acting Under Secretary, Terrorism & Financial Intelligence, US Treasury Department.

Also in attendance were leading global institutions and advisors who specialize in compliance and regulatory risk management, as well as central bank, finance and interior ministry officials. Sessions at the symposium highlighted the importance of robust compliance in relation to combatting illicit finance and how to manage compliance risks and correspondent banking relationships.

Additional meetings addressed the Office of Foreign Assets Control (OFAC’s) enforcement of non-US financial institutions and how OFAC’s jurisdiction affects regional businesses.

“The call for vigilance is a real one. This is a very interesting time in the world of compliance; businesses in MENA need to know how to evolve to keep up with the changing sanctions landscape. For banks, knowing who your customers are and what’s going on in the transactions will require additional time and investment; we’re currently not seeing the required level of scrutiny and investigation that is actually needed.

There will be a constant pressure to maintain this level of diligence but if there is a continued effort to thoroughly understand the risks, identify where the risks lie and put controls in place to mitigated risk, relationships between businesses can be protected through transparent and clear communication.

Compliance is a tricky landscape and protecting institutions against risk is not an easy job. What is certain is that more can definitely been done to protect against these risks,” comments Michael.

“Regional banks’ access to the international financial system is a critical pillar in the economic growth of MENA.  Enhancing risk management and compliance effectiveness is a necessary step in keeping channels open for banks. 

This includes compliance stress testing, risk assessments, urgent attention to customer due diligence and a proactive approach to technology driven next-generation compliance tools,” said Stuart Jones, Executive Director, Fraud Investigation & Dispute Services at EY.

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