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Since the dawn of human society, corruption has always existed in one form or another. This deep-rooted social evil has concerned millions of policymakers, governors, social scientists, and philosophers since Aristotle. In this blog, we will discuss why the financial industry should prioritize corruption monitoring how AML corruption monitoring could weed out corrupt customers, and how corruption monitoring services are a worthwhile investment for a financial firm. Corruption is an ancient phenomenon that caused the fall of the mighty Roman Empire due to the corruption committed by its Praetorian Guards. Over two thousand years ago, the ancient Indian King Kautilya wrote ‘Arthashastra’ discussing the curse of corruption. The greatest Italian poet Dante, condemned bribers in the darkest portion of hell. Shakespeare made corruption a significant theme in his plays. The iconic French general Napoleon in his 1810 ‘Napoleonic Code’ introduced tough sentences to curb corruption.
Corruption is a social cancer that humanity has been battling for thousands of years. In the contemporary world, the Financial Action Task Force (FATF), an inter-governmental policy-making body, is closely cooperating with other transnational organizations like the Conference of State Parties to the United Nations Convention Against Corruption, G20 Anti-Corruption Working Group, and OECD Working Group on Bribery to fight against the social evil of corruption. The regulatory standards set by FATF have played a significant role in fighting corruption as they lead to the detection, probe, and prosecution of cases involving money laundering, corruption, and theft of public funds as well as promote transparency in the financial system. The problem with corruption is that it can not be measured or evaluated, its extent can only be perceived. In the past decades, corruption and money laundering have been observed to be tightly intertwined – almost like crime sisters. In recent history, the era of the 1980s and 1990s is infamous for explosive corruption scandals that rocked the political, economic, and social spheres of countries around the world. The international community responded to the groundbreaking corruption scandals by introducing plenty of policy initiatives and international financial regulations in domestic, regional, and international levels.
A recent report by the FATF reveals that no matter how corruption takes place, all stages of money laundering including placement, layering, and integration involve corruption. Non-compliance with anti money laundering (AML) and combating the financing of terrorism (CFT) provides corrupt people in power limitless access to the international monetary systems. On domestic elevates the African Union in 2003, the Council of Europe in 1999, and the Organization of American States in 1996 have introduced multilateral treaties to curb the rising corruption that continues to occur directly or indirectly in different stages of laundering.
Financial institutions are responsible for making sure that their prospective client is not involved in any kind of corruption scandal. If history has taught financial firms one thing, it’s that they are always at risk of a financial disaster for providing financial services to criminal clients engaged in kleptocracy, bribery, or corruption. Because financial firms always end up paying the cost of the financial misconduct of their clients. Take for instance the 1MDB scandal, where billions of dollars of embezzlement of public development funds occurred which also involved corruption and the transfer of misappropriated 1MDB funds. This historical scandal sent shockwaves throughout the financial world and it ended up causing the arrest of the Prime Minister of Malaysia, Najib Razak who eventually was sentenced to 12 years of prison. The most striking thing about this scandal was the banks that facilitated the transfer of funds and enabled this massive corruption to take place. Goldman Sachs, Swiss banks, Union Bank of Switzerland (UBS), and Bank Syariah Indonesia (BSI) were implicated for their role in the misappropriation of funds.
As per the International Monetary Fund (IMF), the estimated cost of corruption in the general government is US$4.5 trillion. The very impact of corruption is in intensive scope. The spillover damage caused by corruption cases around the globe may go beyond our expectations.
The world of compliance is all about staying one step ahead for an effective prevention of financial crimes. The biggest nightmare for a firm is to get entangled in the corruption scandal of their clients. This is the easiest recipe for a business disaster. To make informed decisions before onboarding a client, firms must prefer conducting comprehensive database analysis by employing a competitive corruption monitoring solution that offers insights in the form of a CPI score which reveals the potential involvement of a prospective client, and screens the prospective client against millions of corruption cases record by employing data analytics for the meticulous identification of subtle patterns and links. Corruption Monitoring aids businesses in preventing unethical practices in the financial industry by providing comprehensive insights into corruption related cases.
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