68% of UK risk professionals expect financial crime risk to increase in 2023

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Kroll, the leading independent provider of global risk and financial advisory solutions, has today revealed that more than two-thirds (68%) of UK risk experts expect financial crime risks to increase over the next 12 months. The findings come as part of Kroll’s newly released 2023 Fraud and Financial Crime Report, which surveyed 400 risk professionals across four continents. UK respondents were broadly in agreement with their global counterparts and the figure for all respondents was 69%.

22% of UK respondents expect this increase in crime risk to be ‘significant’, below the global average of 26%. Meanwhile, just 30% of UK respondents rate their financial crime compliance program as ‘very effective’, this is in-line with the global average (30%), level with the figure for Germany (30%), and ahead of the figures for the U.S. (26%) and France (26%). Well over half (62%) of surveyed global companies are expecting an uptick in levels of government regulatory enforcement actions in the next 12 months.

A third of UK respondents (32%) warned that ‘cybersecurity and data breaches’ is the primary driver behind the anticipated increase in financial crime risks followed by ‘financial pressures on companies or individuals’ (16%) and the ‘impact of remote working’ (16%).

New challenges 

Globally, the report also found that firms are facing a raft of new challenges. The financial crime risk posed by cryptocurrency is a source of concern for 76% of global respondents, with almost a quarter (24%) globally listing it as a ‘significant’ concern. Under a third of global respondents (31%) said that their compliance programs currently cater for risks associated with cryptocurrencies.

Sanctions compliance was another challenge highlighted by the report. According to 48% of UK respondents, sanctions compliance poses a significant concern, with ‘geographic consistency’ identified as the top barrier. The report also revealed that 73% of global respondents plan to dedicate more time towards enhancing supply chain controls or diligence, due to exposure to materials that originate from sanctioned counties or are subject to export controls.

Response from businesses 

To counter a potential uptick in financial crime, the report found that more than two thirds (68%) of UK respondents are planning to invest further in technology, while 62% will increase their cybersecurity budget.

Although, artificial intelligence (AI) has already been implemented into financial crime compliance programs by 56% globally, the respondents highlighted that it’s still relatively new in the majority of these cases. This suggests that the technology’s full potentials are yet to be explored by organisations.

David Lewis, Global Head of AML Advisory at Kroll, said, “The survey results show that firms are face a perfect storm, as financial crime risks increase and get more complex. They are not fully confident in the effectiveness of their defences and will undoubtedly rush to embrace technology to solve all their problems. While organisations need to ensure that they land on the right technological solutions to manage risk, governance and growth in an ever-changing financial crime landscape, the value of skilled experts mustn’t be overlooked.”

Haydn Jones, Global Head of Blockchain and Cryptocurrency Solutions at Kroll, commented: “In the face of this dynamically evolving landscape, the role of the compliance function remains more crucial than ever. As we look toward the future, the complex interplay between technologies of all types, geopolitics, and financial crime, means specialist skills will be required to navigate what is essentially a data-based future.”