Time for banks to display financial crime risk ratings
How can sanctions work when banks spend billions on box-ticking compliance, but criminals still easily launder vast sums through the banking system?
Quiz question: how many regulated benchmarks are there in Europe for measuring financial crime risk? Hint: not many.
Under EU benchmarking regulation, the European Securities and Markets Authority (ESMA) registers all manner of providers of financial indices, mostly used for gauging the performance of investment funds.
ESMA is also the sole regulator of credit ratings agencies in the EU.
It regulates one company that provides a single index that defines standards for measuring financial crime risk. That is the Elucidate FinCrime Index (EFI), the signature product of Elucidate, a Berlin-based financial crime risk quantification agency founded in 2018.
The moment you engage in banking, there is some potential for financial crime risk
Elucidate has ambitions to be the equivalent for scoring banks’ exposure to financial crime risk of Moody’s, S&P and Fitch in credit ratings.
“The moment you engage in banking, there is some potential for financial crime risk,” Max Heywood, head of public sector at Elucidate, tells Euromoney. “We may wish it was binary, something that can simply be switched off. But when you are conducting millions of financial transactions per day, that is simply not possible.”