Facing Financial Crime in the Fourth Industrial Revolution

14 December 2023

The future is ours to shape as we confront the risks of the fourth industrial revolution

Financial crime globally costs around $2.1 trillion, surpassing the annual GDP of major economies like G20 nations.

The inaugural ‘Risk 4.0’ Forum was held as part of the Abu Dhabi Finance Week, sponsored by the UAE Executive Office of Anti-Money Laundering and Counter Terrorism Financing.

For the global community engaged in the fight against financial crime, the inclusion of the Risk Forum to examine the financial crime risks during a period known as the ‘fourth industrial revolution’ is not only timely, but of critical importance.

The term ‘fourth industrial revolution’, as coined by the World Economic Forum, refers to the current era of connectivity, advanced analytics, automation, and advanced manufacturing technology.

Financial crime is a global problem, costing the global economy an estimated at $2.1 trillion, equal to or larger than the annual GDP of major economies and countries, including G20 nations.

This staggering number excludes corruption, tax evasion or cybercrime, underlining the significant damage caused by criminals, from drug and human trafficking to environmental and climate change-related crimes.

When we look to the lessons of history, and those previous ‘revolutions’, we see that key moments in time bring about significant change, with some transitions curbed, other initiated, and some accelerated.

Navigating financial crime in the fourth industrial revolution

Today, we face a pivotal question: does the fourth industrial revolution signify an increase in threats from financial crime, or will it facilitate efforts to counter such criminal activity? At stake is the integrity of the global financial system, the health of our economies, and the right of citizens to live free from crimes related to money laundering and the financing of terrorism.

Financial crime is never victimless, it affects us all.

We believe that the future is ours to shape. By coming together, as we did last week at the Risk Forum, we can mitigate the emerging risks brought about by the fourth industrial revolution and create major development and investment opportunities.

The fourth industrial revolution can be characterised by three major transitions: in technology, energy, and world order. All three transitions significantly impact how financial crimes are committed, and how we are combatting them.

Technological innovations transforming financial system

The technology transition, well documented with innovations such as online financial products (such as buy now pay later), the Metaverse and virtual assets, has transformed the financial system. And the scale of our response is considerable: a study by Juniper Research estimates that global software spend on financial crime prevention tools will exceed $28.7 billion by 2027, increasing from $22.1 billion in 2023.

While these technologies offer new opportunities for fraudsters, we are witnessing a proliferation of cybercrimes targeting corporations and individuals. Advanced technologies such as AI, VR, and machine learning, provide advantages to law enforcement and criminals alike. However, the power is in our hands.

Global efforts are having an impact, particularly in cryptocurrencies, with Chainanalysis reporting a 65 percent reduction in crypto inflows to known illicit entities between January and July this year compared to the same period in 2022.

Together with the UAE’s hosting of COP28 this year, it is crucial to note that the financial system continues to be abused to launder money from climate crimes, with the Illegal Wildlife Trade threatening biodiversity to the value of $200 billion annually according to estimates by the World Bank. At COP28, the Executive Office is supporting and taking part in the International Initiative for Law Enforcement of Climate Crimes, led by the UAE Ministry of Interior and United Nations Office on Drugs and Crime.

We must remain vigilant to green transition risks from corruption, fraud, and counterfeit goods.

Addressing challenges from the fourth industrial revolution and its related transitions will require robust international cooperation and effective partnerships with the private sector. It will require renewed commitment, sufficient resourcing, and a prioritised approach to sustainable and continuous AML/CFT systems.

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