Financial Crime World

Emerging Risks in Financial Crime Prevention in Eritrea

Growing Concerns Over Fraud and Financial Crime Prevention

In recent years, the financial sector in Eritrea has been facing growing concerns over fraud and financial crime prevention. As technology advances and geopolitical events unfold, regulators are working to mitigate these risks and ensure that financial institutions operate with integrity.

Regulatory Focus Areas

According to a KPMG report, “Ten Key Regulatory Challenges of 2023,” regulatory focus areas include:

  • Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF): Regulators will continue to combat threats and vulnerabilities in these areas.
  • Fraud Models and Operations: Regulators expect companies to implement robust fraud controls to manage potential losses and identify suspicious activity.
  • Insider Corruption: Regulators will be paying close attention to insider corruption and the need for effective risk management practices.
  • Cybercrime: As technology advances, regulators are working to ensure that financial institutions have robust cybersecurity risk management in place.
  • Robust Cybersecurity Risk Management: Regulators expect companies to prioritize cybersecurity and protect against emerging threats.

New Areas of Regulatory Focus

In addition to the existing regulatory focus areas, regulators will also be paying close attention to:

Crypto and Digital Assets

  • Regulating Crypto and Digital Assets: Regulators will combat threats and vulnerabilities posed by digital assets and strengthen financial safeguards.
  • AML for NFT and DeFi: With the rapid growth of NFTs and DeFi platforms, regulators indicate there is an elevated risk of money laundering and terror financing.

Sanctions and Price Cap Compliance

  • Sanctions and Price Cap Compliance: Continued geopolitical discordance will result in continued focus on sanctions and price cap compliance.

Interplay with Consumer Protection

While regulators recognize the need for fraud controls to manage potential losses and identify suspicious activity, they will remain focused on potential violations of consumer compliance regulations. Regulators expect companies to:

  • Implement Risk Programs: Implement risk programs that identify and mitigate scams directed at vulnerable populations.
  • Conduct Analysis: Conduct analysis of outcomes and models across consumer segments.

Evolving Risks

Regulators face the challenge of mitigating complex and evolving risks that may threaten or have been identified by the Administration as issues of national security. Areas of national security risks include:

  • Domestic and International Terrorist Financing: Regulators will continue to combat threats and vulnerabilities in these areas.
  • Increased Focus on OFAC and Sanctions: With ongoing geopolitical tensions, regulators expect companies to prioritize sanctions compliance.
  • Transnational Criminal Organizations: Regulators will be paying close attention to the activities of transnational criminal organizations.
  • Drug and Human Trafficking: Regulators will continue to combat threats and vulnerabilities in these areas.
  • Smuggling, Proliferation Financing, and Synthetic Identity Fraud: Regulators expect companies to prioritize risk management practices in these areas.

Key Recommendations

To combat emerging risks in financial crime prevention, companies should consider the following:

  • Add Analytics and Automation: Add analytics and automation to client onboarding processes.
  • Eliminate Antiquated Technology: Eliminate outdated technology and implement modern solutions.
  • Establish a Mature Conduct Risk Program: Establish a mature conduct risk program that prioritizes risk management practices.
  • Strengthen Controls in Regulatory Focal Areas: Strengthen controls in areas such as AML, CTF, and sanctions compliance.