Financial Crime World

Emerging Trends in Financial Crime in Mauritius

Mauritius has recently been added to the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring due to deficiencies in its anti-money laundering (AML) and combating the financing of terrorism (CFT) regimes. This development comes at a time when financial crime is becoming increasingly complex and interrelated.

The Cost of Financial Crime

According to the World Economic Forum, fraud and financial crime is a trillion-dollar industry, with private companies spending approximately US$8.2 billion on AML controls alone in 2017. The Association of Certified Fraud Examiners’ global report on occupational fraud reveals that organizations typically lose 5% of their annual revenue to fraud every year.

The Reality of Financial Crime

A recent survey by PwC found that half of respondents had experienced some form of economic crime or fraud in the past two years, with the top four instances being:

  • Customer fraud
  • Cybercrime
  • Asset misappropriation
  • Bribery and corruption

The survey also showed that 47% of companies reported a fraud in the past 24 months, with an average of six frauds reported per company.

The Impact of COVID-19

The COVID-19 pandemic has created additional risks for organizations, as less resources may be available to devote to managing financial crime at this time. With the rise of cyber threats and complex criminal activities, it is becoming increasingly difficult for companies to detect and prevent financial crimes.

Combatting Financial Crimes in Mauritius

To combat financial crimes, Mauritius has reviewed its AML/CFT legal framework and issued new guidelines for regulated entities. However, managing financial crime risk requires a more integrated approach that involves:

  • Identification of suspicious activity
  • Detection of anomalies
  • Response to potential threats

The Need for Integrated Risk Management

The current reality of financial crime risk management relies on rule-based scenarios, manual interventions, and generic risk scoring models, which is no longer effective in today’s complex operating environment. A more holistic view of the underlying governance, risk management framework, and processes is needed to create an appropriate operating model for managing these risks in an efficient and cost-effective manner.

The Case for Integrated Financial Crime Risk Management

Emerging themes in financial services include increased complexity, uncertainty, and interdependence of different types of risks. To get it right, financial institutions must adopt a three-step process:

  • Identification and authentication of the customer
  • Monitoring and detection of suspicious or anomalous behavior
  • Action taken in terms of response, investigation, and crisis management

By taking a more integrated approach to financial crime risk management, companies can create:

  • Simplified processes
  • Better customer experience
  • Happier customers