Financial crime measures dip in MENA due to regulatory overload

27 February 2018 4 min. read

The focus on financial compliance and security measures has diminished in the MENA region according to a financial crime report from Deloitte, for the first time across the life of its local surveys. And it may be that regulatory overload is playing a part.

In its fourth annual report into financial crime in the Middle East and North Africa, the Big Four assurance and advisory firm Deloitte has for the first time found a reversal in company compliance and spending measures, recording both a notable drop in the number of financial crime programmes employed across organisations and a decline in the regular assessment of exposure to risks.How has your investment in anti-financial crime activityThe survey report, which was conducted in conjunction with financial data firm Thomson Reuters, questioned organisations active across a range of industries, with a leaning toward the financial services sector but including those in the fields of professional services and consultancy, with the typical respondent in a position of senior management in the governance, risk and compliance operations of the company. 

Along with the reduced attention to compliance, the survey also recorded its first flattening in the rate of investment into technology and resources as well as into improving the sophistication of existing technologies. Together, with the reports other findings as to the functional burden on compliance departments, the reduced compliance measures and downturn in projected tech spend – contrary to the increase in risks, regulations and penalties – may suggest a widespread sense of fatigue and inundation.How do you expect your technology to changeIndeed, the report notes that the number of daily regulatory updates required just a decade ago when Thomson Reuters first began its tracking totaled around ten, whereas now the daily obligation for firms sits closer to 200. In a previous Thomson Reuters compliance report, executives widely expressed fatigue and overload as to the regulatory bombardment while board members indicated that such matters were consuming a disproportionate amount of time.

Such sentiments appear to persist. When questioned on their biggest expected upcoming challenges in managing financial crime and compliance, the current respondents cited ‘securing new resources’, ‘justifying the costs’, and ‘securing support from key business leaders’, as three of the top priorities, joined by ‘attracting and retaining key skills’ and ‘communicating tone at the top overall’ in overall citations.

As stated by the report; “It has become apparent throughout the years of our study that many compliance executives are constantly seeking more – more support, more resources, more skills, and more analysis – in a bid to relieve some of the stress of the compliance function.What do you believe will be the biggest challengeThis overburdened and despondent mood it would seem is further impacting all-round confidence in the abilities, competencies and programmes for governance, risk and compliance management, with the commonplace gloom expressed by executives even more greatly elevated in the most recent survey. Altogether, more than half of the respondents were at most somewhat confident of their crime prevention measures meeting compliance regulations, with nearly one quarter not very confident or not confident at all.

As for the primary reasons cited for the poor levels of confidence, close to half of the responses (47%) pointed to the perceived lack of senior management support, followed by an ‘absence of clear implementation plan, including training and awareness’, ‘competing business goals and objectives’, and a ‘lack of availability of specialist resources’. As perhaps a measure of the prevailing pessimism, some 5% of respondents weren’t even sure of the specific reason for why they lacked confidence.What are the main reasonsIn terms of investments, while 66% of respondents expected their technology to become more sophisticated over the next two years, the figure represents a substantial drop on the 90% positive response rate from the previous survey. Rather than regulatory fatigue or complacency however, there may be another factor contributing to the falling stated levels of projected technological investment, with the report asking, “Are decision makers waiting for direction from regulators before they invest in innovative technology?”

The report posits; “It may be that all the talk of disruption, the coming financial and regulatory technology that is about to change our lives so dramatically, may, in fact, be holding back investment activity in technology. There is as yet no clear direction forward… Investing in technology is a substantial investment and once a particular system is employed, it is very difficult to undo, as any IT manager struggling to unravel legacy systems can attest to.”