Blog Posts

How Compliance Teams Should Prepare for a Recession

02/10/23 5 minute read

If you’ve heard rumblings of an upcoming recession, you aren’t alone. Over 50 percent of economists forecast a recession before the end of 2023, according to a poll by the National Association for Business Economics. And 3 percent think a downturn has already begun. 

Much has been said about the different ways your business needs to prepare for a recession. For financial institutions and governing bodies, keeping a watchful eye on crime might rise to the top of the list.

Does a recession increase crime?

Experts are saying that an economic downturn could be an indicator of a significant increase in financial crime. And there’s historical precedent for this thinking. According to a survey of fraud examiners in 2009, over 55 percent experienced a significant increase in fraud cases. Additionally, other financial crimes, such as mortgage fraud, identity theft, and employee-related schemes, saw an increase as a result of the 2008 recession.

Anti-corruption watchdog Transparency International has warned “corruption often thrives in times of crisis, particularly when institutions and oversight are weak, and public trust is low.” This increase in crime can also be attributed to the growing financial pressures placed on businesses and individuals. Sharp economic downturns result in more risk-taking, which can cross the line into financial crime. And it’s not just crime from predictable sources, economic stress in a recession results in higher risk from unexpected and previously legitimate actors.

How can compliance teams prepare for heavy workloads?

So, what does this mean for compliance professionals specializing in anti-money laundering and related risks? With an increase in crime, compliance officers are likely to see an equal increase in workloads. It’s time for financial compliance professionals to reevaluate their approach to financial crime risk.

Preparing for this increase can come in various forms. For example, organizations could “de-risk,” meaning take steps to tighten restrictions on client and business relationships to minimize the likelihood of doing business with shady actors. This is particularly important for reputational reasons considering financial crime is often entangled with a number of other crimes, including drug and human trafficking. In a sharp economic downturn, these crimes and behaviors could spike as more people look for quick money.

Compliance departments should be of high priority for businesses this year. A report from TransUnion found a 149% increase in fraud attempts in the first four months of 2021. This means workloads have already increased, and if the above predictions are true this trend could continue. If resources are being stretched to deal with this increase in cases, financial organizations could be facing major risks. 

Automation will be critical to help manage the work on a compliance team’s plate. A platform like Sayari Graph, enhances the efficiency and effectiveness of financial crime investigations by leveraging global public records and graph technology to map complex, cross-border corporate networks.s. 

The platform’s Risk Factors feature automatically flags entities across 30 different types of risk sourced from existing and enriched risk intelligence data so investigators can quickly identify risky entities. This also ensures that you don’t miss any potential downstream or upstream risk that could remain hidden if the investigation were to be done manually. 

Want to see a Sayari Graph investigation in action?? Watch our Masterclass on investigating money laundering organizations to see how your organization can prepare for a potential increase in financial crimes.

Related Resources

All Resources
Everything you need to know about Chinese SASACs
Blog Posts
4 minute read
Understanding the Chinese government’s pervasive influence over the country’s domestic and international companies is crucial to...
Read More
Uncovering 3 Non-Obvious Indicators of Forced Labor Risk
Blog Posts
4 minute read
By asking U.S. importers to prove that their supply chains are free of forced labor, the Uyghur Forced Labor Prevention Act (UFLPA) has...
Read More
China’s Use of Golden Shares: A Case Study on Alibaba
Blog Posts
4 minute read
In 2017, the Cyberspace Administration of China (CAC), China’s nominal internet regulator fully under the control of the Chinese Communist...
Read More