The revelations surrounding the conduct and likely criminal activity of Isabel dos Santos has brought to the fore familiar issues in the financial crime space. The reporting conducted by the International Consortium of Investigative Journalists (ICIJ) paints a picture we have seen before: the child of an autocrat loots their country for billions and enjoys the proceeds in the European and American markets, similar to Guinea, Kazakhstan, the Congo, or any number of other countries (New York Times, CNN, Quartz).
The case of the Luanda Leaks is simply further evidence of a systemic flaw present within the global financial network: the lack of transparency and consistency in financial crime risk evaluations. This has left financial institutions (FI) to seek external validation from consultancies in order to provide confidence to counterparties. The same consultancies who occasionally find themselves advising clients on questionable financial dealings.
The only way to change outcomes and effectively prevent financial crime is to change methods; technology offers solutions to this conflict.
As FIs are often left to turn to a Big Four consultancy for risk evaluations, what is perhaps the most concerning about the dos Santos case is the picture that it paints of the consultancy industry on the whole, as well as how poorly it reflects on the most acclaimed firms. The consultancies that structured many of dos Santos’ allegedly criminal activities are the very same consultancies that audited dos Santos’ companies. They are also the same consultancies that are today carrying out external reviews and risk assessments for major FIs, piecing together costly bespoke risk reports without quantification, standardisation of comparability, and as such are left open to bias and potential conflicts of interest.
That said, whether banks carry out counterparty due diligence themselves or ask a consultancies to do it, these FIs are left largely in the dark with regards to the actual on-the-ground controls of their counterparties.
What is required is technology capable of processing data systematically to identify otherwise invisible trends and patterns indicative of criminal activity, such as that allegedly carried out by dos Santos.
This challenge requires an integrated method for financial crime risk quantification and scoring, one that is capable of independently clarifying risk levels across FIs at a deep level.
Financial crime is a multi-metric phenomenon, and requires comprehensive data analysis for systemic identification.
Further, it must be complimented by a means of openly sharing counterparty risk scores across FIs in a standardised format.
Elucidate has developed and deployed the technology required to tackle these issues. Utilising a hybrid of expert-driven and machine-learning modelling, the Elucidate FinCrime Index (“EFI”) provides FIs with a standardised, automated, and transparent method for articulating the risk exposures of their counterparties, putting all parties on equal footing. FIs are rated not only according to their control framework, but by their control outcomes, with scores shared across the financial network. The EFI is a critical step towards a more deeply integrated and capable global financial system, where trust, confidence and transparency enable stronger management of financial crime risk.