Money laundering and identity theft are the most worrying financial crimes for financial services firms globally, according to a recent study.

Increasing regulatory oversight and fears of terrorist financing have driven concerns on money laundering, which was the biggest cause for concern among 86 per cent of executives polled by research firm Datamonitor. Respondents also said the cost of compliance with anti-money laundering requirements internationally would rise by 43 per cent by 2007.

ID theft, meanwhile, has rapidly become a major problem for companies. According to the study, which was commissioned by Norkom Technologies, 87 per cent named it as the biggest concern for their organisation. Indeed, ID theft now accounts for more than $1.5 billion in losses in the US and close to $80 million in the UK.

While seen as less of a cause for concern than ID theft and money laundering, card fraud is the top priority for organisations in terms of financial crime.

Despite regulatory imperatives driving investment and development in the area of financial crime, just one in five firms have developed a co-ordinated approach to compliance and financial crime. Those that have are expected to gain first mover advantage from integrating departments that deal with financial crime and compliance and are expected to lead the way in return on investment.

However, organisational barriers have emerged as the biggest obstacle to integrating financial crime and compliance responses. While firms, in adopting techniques like enterprise risk management, have been able to break down silos that exist within organisations, it is departmental silos that are holding back integration. Shared processes, cross functional communication and pooled approaches are being held back by organisational inflexibility, according to 67 per cent of respondents.

According to those that have managed to integrate their approaches, the benefits are clear. Automation of processes is key, with increased accuracy of detection of suspicious transactions and behaviour. Respondents said automation can reduce the incidence of financial crime by up to 70 per cent, while investigations, both internally driven and regulator driven, can see cost savings of 98 per cent.

Combining compliance and financial crime also offers a better chance of securing management buy-in as the return on investment benefits are more easily quantified through a combined approach.

“Traditionally financial service providers have viewed financial crime and compliance as separate disciplines,” said Paul Kerley, CEO of Norkom Technologies. “But within an increasingly tight-margined industry there is a strong desire to pursue a single investment stream to both reduce criminal losses and drive down the cost of compliance. This is now achievable since single technology platforms are now emerging that can detect crime, investigate it and compile the management information required to fulfill the regulator’s requirements. It can clearly be demonstrated that many of the processes and technologies employed to satisfy the regulator’s demands can deliver additional ROI by being deployed to fight crime.”