The State of Financial Crime 2022: Key Takeaways for Asia Pacific Firms

This year is likely to be one of ‘adjustment’ as challenges outside of the pandemic emerge – including environmental crime, geopolitical standoffs, new regulatory frameworks for areas such as crypto-assets, and the implementation of new AML/CFT technologies. 

ComplyAdvantage’s The State of Financial Crime 2022, explores these issues in detail, based on insights gained from a survey of 800 senior compliance decision-makers across Asia-Pacific, Europe and North America. We look at some of the highlights.

Financial crime trends

Criminals will adapt and exploit opportunities as the world continues to deal with Covid-19. Disrupted supply chains, increasing fraud, widespread ransomware attacks and digital payments systems under continual attack, are all possible in 2022. Firms should review their business risk assessments to identify emerging threats, and update policies and processes. 

• Supply chain shocks: The ‘Covid-Zero’ strategy in China has already resulted in the closure of Chinese ports and led delivery firm FedEx to shut its base in Hong Kong. The trade dispute between China and Australia has also escalated, with both seeking new markets for goods. With the cost of shipping also escalating in recent months, firms should be aware that criminal gangs may exploit uncertainty and enter the shipping market to operate trade-based money laundering schemes.
• Ransomware: Ransomware attacks have become a low-cost, high return method for extorting money. The UN Office on Drugs and Crime (UNODC) noted that the digitization of society, alongside the pandemic, has contributed to a 600% rise in cybercrimes in Southeast Asia. By 2031, research firm Cybersecurity Ventures predicts that there will be a new attack every two seconds, costing the world $265bn. Firms should be aware that they may be liable for potential sanctions violations if they facilitate ransomware payments, and should fine-tune their transaction monitoring systems to ensure they take into account fraud methods. 

Geopolitics and sanctions

A tense and rapidly changing geopolitical landscape will see new sanctions measures introduced at speed, with China, Russia and fragile states currently most at risk of sanctions. Firms should ensure they have robust adverse media, sanctions screening and payment filtering systems in place to identify any changes to sanctions lists. 

• China: China is the geopolitical hotspot that firms are most concerned about heading into 2022 (more than 40%). There is ongoing concern about human rights abuses in Hong Kong and Xinjiang, with countries including Australia, Canada, the US and the UK pledging a diplomatic boycott of the Beijing Winter Olympics over Xinjiang. And the US and China are expected to continue applying ‘tit-for-tat’ sanctions. 2022 is unlikely to bring normalization of relations between China and Australia, particularly after Australia announced its participation in the AUKUS partnership, which is designed to help Australia acquire nuclear-powered submarines to counter China’s influence in the Indo-pacific. Firms should monitor Chinese relationships closely.
• North Korea (DPRK): State-sponsored cyber warfare continues to be a major concern that could lead to further sanctions. The US and UN estimate that DPRK has stolen $3.2bn through cybercrime, including the theft of military information. The DPRK is also suspected of stealing crypto and laundering the proceeds through crypto exchanges. 

Regional trends

There are several regulatory developments in Asia-Pacific that firms should keep an eye on in 2022. Many countries are dealing with the outcomes or expectations of FATF mutual evaluation reviews, making improved compliance with AML/CFT regulations a top priority. Ensuring that new technological advancements are adopted responsibly, will also be a major concern. 

Our survey showed significant regional differences in firms’ attitudes towards AML files and violations. 40% of Asia-Pacific firms surveyed said they choose to incur AML fines/violations “all the time,” (46% in Australia and 41% in Singapore) compared to 34% in the Americas and only 30% in Europe. Ongoing due diligence of correspondent banking relationships was the area of AML regulation that firms in Asia-Pacific were most concerned about.

Public-private partnerships

Regulators in the Asia-Pacific region continue to lead the way in developing innovative public-private partnership arrangements — a trend that is likely to continue, and expand globally, in 2022. New solutions built on innovative technology platforms are enabling deeper and more sophisticated collaborations between regulators and financial institutions.

• Singapore regulator MAS has been a leading innovator, announcing a groundbreaking digital platform to facilitate information sharing between major banks, which is due to be introduced in 2023.
• The Fintel Alliance, established by Australia’s regulator, AUSTRAC, is another public-private partnership that has continued to develop. In its 2021 Fintel review, AUSTRAC highlighted that 5,258 SARs were lodged relating to the focus areas for Fintel.

Firms should continue to invest in new RegTech solutions in 2022, reviewing their compliance tech stack, exploring how new technologies can deliver against their objectives, reduce data silos and help them to fully realize a risk-based approach. They should also assess the skills and experience of their in-house team to explore if/where new perspectives could add value.

Download the The State of Financial Crime 2022 to find out more.