Financial Crime World

Emerging Risks in Financial Crime Prevention in Thailand: A Growing Concern

Introduction

The COVID-19 pandemic has brought about unprecedented changes in the business landscape, creating new opportunities for financial crime. According to PwC’s Global Economic Crime and Fraud Survey 2022 - Thailand Report, Thai companies are facing a rising tide of external fraud, including cybercrime, environmental, social, and governance (ESG) reporting fraud, supply chain fraud, and anti-embargo fraud.

The Rising Tide of External Fraud

The survey found that nearly one in four (22%) of Thai companies experienced fraud, corruption, or other economic/financial crime within the last 24 months. This is a concerning trend, especially when compared to global standards. Only 37% of Thai respondents have a designated risk management/compliance function for responding to fraud risks, which is lower than the global average.

The Exacerbating Effects of the Pandemic

The pandemic has exacerbated these issues, with 24% of Thai companies experiencing an increased cybercrime risk and 13% facing asset misappropriation risks. Furthermore, less than 30% of Thai respondents have increased the size of their enterprise risk management/compliance functions, a stark contrast to the 53% global average.

Supply Chain Fraud: A Growing Concern

One area that stands out is supply chain fraud, with less than 10% of Thai respondents proactively monitoring supply chain risks. The ability to identify fraud/misconduct within the supply chain is relatively low, making this an attractive target for financial crime.

ESG Reporting Fraud: A New Threat

While more than half of Thai respondents have processes to identify and manage potential ESG risks, the manipulation of ESG reports by employees or third parties remains a significant concern. This highlights the need for companies to prioritize ESG reporting transparency and oversight.

Measures to Enhance Fraud Risk Management

To mitigate these emerging risks, companies can take several measures:

  • Understand the end-to-end lifecycle of customer-facing products: Companies should have a clear understanding of their customers’ journey, from onboarding to transactional activities.
  • Strike the proper balance between user experience and fraud controls: Businesses need to find a balance between providing a seamless user experience and implementing robust fraud controls.
  • Orchestrate data to track end-to-end lifecycles of users and generate meaningful alerts: Companies should leverage technology to track user activity, identify potential risks, and alert relevant teams.

Conclusion

The survey highlights the importance of investing in risk management and compliance functions to protect against emerging risks in financial crime prevention. As fraudsters become more sophisticated, it is crucial for businesses to prioritize investments in better protecting themselves from economic crime.

Experts Weigh In

“The survey shows that Thai businesses’ perimeters are vulnerable to fraudsters who are adopting new methods and technologies to breach defences undetected,” said Phansak Sethsathira, Risk Consulting Partner at PwC Thailand. “Adding to the risk is that companies in Thailand are falling behind in terms of investment in risk management and compliance.”