Fraud represents 26% of all financial crimes in South Africa, making it the most prevalent type, according to recent findings presented by LSEG Risk Intelligence. This trend highlights why accountable institutions should prioritize robust customer due diligence, thorough risk assessments, and regular client screenings. These measures are essential for managing the risks associated with escalating financial crime.

In South Africa, other forms of financial crime such as regulatory violations (13%) and theft or embezzlement (12%) follow closely behind fraud. This ranks South Africa second on the continent for recorded fraud, illustrating the scale and severity of financial crime within the region. The convergence of crime types, including fraud interlinked with money laundering and corruption, emphasizes the need for integrated approaches to crime prevention. Institutions without strong client due diligence and screening procedures risk exposure to these interconnected crimes, which criminals increasingly leverage to evade detection.

Globally, fraud is also on the rise, with politically exposed persons (PEPs) accounting for a notable 10% of offenders. This further underscores the need for risk rating and screenings to manage the elevated risks associated with high-profile clients. Risk identification and client profiling are crucial to preemptively address vulnerabilities and reduce an institution's exposure to crime-related losses.

To support efforts against financial crime, the South African Anti Money Laundering Integrated Task Force (SAMLIT), established by the Financial Intelligence Centre, plays a significant role. SAMLIT’s collaborative approach strengthens public-private partnerships and encourages real-time information sharing, further underscoring the importance of cooperation in tackling complex, organized financial crime.

For accountable institutions, focusing on customer due diligence and effective risk management practices isn’t just a regulatory requirement—it’s a proactive safeguard against becoming enablers of financial crime. Proper client screening and risk assessments are fundamental in identifying red flags early, allowing institutions to address risks before they escalate into costly and damaging incidents.

Why Accountable Institutions Must Strengthen Customer Due Diligence and Risk Assessment Efforts