Financial crime is wreaking widespread damage on businesses across the Asia-Pacific region and has spawned an economic underworld in which more than 40 million people work in conditions of modern slavery, according to a major new report.
One of the most comprehensive surveys of international businesses to date - titled Revealing the True Cost of Financial Crime - has found that just under half of business organisations in the Asia-Pacific have been victims of fraud, theft, money laundering or other financial crimes.
A significant 49 per cent of people questioned in the survey carried out by Thomson Reuters admitted that their organisation had fallen victim to financial crime over the past 12 months. Cybercrime and fraud were cited as the most common crimes.
The high rate of crime came despite corporations allocating 3.1 per cent of their annual spending towards combating illicit financial activity.
The wide-ranging survey interviewed more than 2,300 senior business leaders in large companies, including some in China, to shine a light on how pervasive such crimes have become across the world.
It also highlights how most corporations across the globe do not realise the true cost of crime in the business world, a cost that extends far beyond financial and reputational damage and has helped create modern-day slavery and human trafficking.
The report quotes The Global Estimates of Modern Slavery - produced by the Walk Free Foundation and the International Labour Organisation - which estimates that at present, more than 40 million people exist in conditions of modern slavery.
According to the Walk Free Foundation's 2016 Global Slavery Index, five countries - India, China, Pakistan, Bangladesh and Uzbekistan - are responsible for nearly 60 per cent of modern slavery globally.
Julia Walker, Thomson Reuters' head of Risk and Regtech for the Asia-Pacific, said: "Many of these people are in forced labour operating in our supply chains or unknowingly supported and financed by activities hidden in our businesses. Financial crime causes incalculable harm around the world.
"The proceeds of bribery, corruption, fraud, narcotics trafficking and other organised crime have all been implicated in the financing of terrorism, human rights abuses such as slavery and child labour, and environmental crime."
Financial crime is not a faceless crime; the most vulnerable in our society are preyed on and exploited by organised crime for profit.
The report noted that almost all respondents recognised that greater collaboration was vital to winning the war against financial crime, with 94 per cent of companies polled believing there should be more sharing of financial intelligence, while 93 per cent said that public-private partnerships should be increased and improved.
The news comes after a recent report in the South China Morning Post detailing the uncertain future of one such public-private initiative in Hong Kong.
Formed in response to global concern that current systems to identify, disrupt and seize the massive flow of dirty money through the international financial network are not fit for purpose, the Fraud and Money Laundering Intelligence Taskforce (FMLIT) was set up in the city last May.
While officials have confirmed that the task force - which has put in place a new system of intelligence sharing and alerts allowing police, banks and the Hong Kong Monetary Authority to deal more quickly and effectively with suspected financial criminality - will continue to operate until November, its long-term future hangs in the balance pending a full-scale review in the coming months.
Other major findings of the report were that: Fewer than 40 per cent of relationships which corporations set up with vendors and suppliers are screened for bribery and corruption, money laundering, fraud, theft, cybercrime and slave labour or human trafficking; 75 per cent of business organisations prefer to avoid risk rather than manage it by not working with high-risk vendors.
While 96 and 95 per cent of respondents respectively cite cybercrime and bribery and corruption as significant financial crimes, very few believe slavery and human trafficking to be results of financial crime.
Ninety-six per cent of respondents across the region support the idea of sharing compliance best practices by companies, with many in favour of collaboration in the ongoing fight against all forms of financial crime.
Walker said: "Financial crime is not a faceless crime; the most vulnerable in our society are preyed on and exploited by organised crime for profit.
"Financial institutions are carrying the financial burden collectively spending billions trying to prevent money laundering and the proceeds of illicit activity. Year on year they are seeing greater amounts disappear from their business as a result."
At this year's World Economic Forum in Davos, Thomson Reuters and Europol - the European equivalent of Interpol - launched a coalition to improve awareness of the extent of financial crime and promote more effective information sharing.
- South China Morning Post