Capgemini-雙重威脅雙重防御-為什么ESG是銀行有效合規(guī)的關(guān)鍵 Dual threat dual defense Why ESG is the key to effective bank compliance

Dualthreatdualdefense

WhyESGisthekeytoeffectivebankcompliance

Asynergisticapproachtosafersustainablebanking

Today,manyfinancialinstitutionstrack

environmental,social,andgovernance(ESG)factorstobetterunderstandtheorganizationstheydo

businesswith.Theydosoforavarietyofreasons—toreduceriskfromissuessuchasclimatechangeandscandal;togaugethepotentialfinancial

performanceofclientorsuppliercompanies;to

guidecustomerslookingforsustainablefinanceorresponsibleinvestments;tomanagetheirowncarbonfootprint;andtocomplywithincreasing

ESG-relatedregulatoryrequirements.Atthesametime,institutionsputagreatdealofeffortinto

financialcrimecompliance(FCC),andmeetingthestandardsandregulationsestablishedbytheU.STreasuryDepartment’sFinancialCrimeEnforcementNetwork(FinCEN)andother

governmentalbodies.TheseFCCoperationsaimtoreducemoneylaunderingandprotectthefinancialsystemfromtheflowofillicitfunds.

There’saconsensusthatESG

considerationsshouldbeincorporatedintotheclientprospectevaluation

stage.Thisensuresthatreputationalriskisaddressedupfront,priorto

onboardingandKYCprocesses.

BusinessExecutive,majorUKbank

BothESGandFCCscreeningareimportantforall

financialinstitutions.Thesetwocriticalactivities

havetraditionallyoperatedasseparatedomains,

eachinitsownsilopursuingitsownmission.But

thereisanuntappedpotentialtoleverageESG

considerationsinFCC,usingtechnologytocombinethestrengthsofbothdomains.Bydoingso,

institutionscansignificantlyenhancetheireffortstoproactivelyuncoverandcombatillicitactivitiesandreducetheirownriskofbeingassociatedwithcrimeandrunningafoulofregulators.

2Dualthreat,dualdefense

ThelinkbetweenESGandFCC

IntheirFCCoperations,financialinstitutions

focusonKnowYourCustomer(KYC)effortsthataimtounderstandthecustomer’sbusinessand

anyassociatedcriminalrisks.KYClookslargely

atfinancialtransactions,moneyflows,and

periodicnegativescreeningstoidentifypotentialproblems.Ontheotherhand,ESGscreeninglooksatarangeofnewsreportsandpubliclyavailableinformationtodevelopinsightsintoacorporationoritsassociatedparties’commitmenttoethical

behaviorandresponsiblepractices.

Althoughtheyfocusondifferentdomains,theseareasarecloselyrelatedsincebadESGbehavior

caninvolvepredicatecrimesthatleadtomoney

launderingchargesfortheresponsibleparties.Forexample,companiesusingillegalminingorloggingpracticesthatleadtoenvironmentalharmwill

wanttohidethemoneyearnedintheiroperations.Sotoowillthoseinvolvedinunethicalsocial

behaviors,suchashumantraffickingortheuseofchildlabor.Inaddition,companieswithweakgovernancestructuresaremoresusceptibleto

briberyandcorruption,whichareassociatedwithembezzlementandfraud.

ESGrisksareoftennotfactoredinto

theriskratingduringonboardingand

KYCprocesses.However,somebanks

incorporateESGchecksthroughadversemediasearchesduringacustomer

refresh.PolicyupdatesmaybenecessarytoformalizetheinclusionofESG

considerationsinriskassessments.

ComplianceExecutive,globalbank

3Dualthreat,dualdefense

TheimpactofESG-relatedfinancialcrimesis

profound.Indeed,environmentalcrimeandhuman

traffickingaretheworld’sthirdandfourthmost-

profitablecriminalactivities,behinddrugtraffickingandthesaleofcounterfeitgoods.TheFinancial

ActionTaskForceestimatesthatenvironmental

crimealone—includingforestry-relatedcrime,illegalmining,andwastetrafficking—generates$110billionto$281billioninillicitfundsayear.1Transparency

Internationalestimatestheglobalcostofcorruption,includingbribery,tobeatleast$2.6trillionperyear,or5%oftheglobalgrossdomesticproduct.2

AlthoughFCCandESGmonitoringtraditionallyfocusondifferentareas,itisbecomingincreasinglyclearthattheycancomplementeachothertosupport

thefightagainstfinancialcrime.ESGmonitoring

broadensthescopeofscrutinybeyondthestandardKYCpracticesbyevaluatingawiderrangeof

information,suchasnegativereportsonacompany’sactivities,ESGdisclosures,andthird-partyESG

ratings.Thisapproachcanenhanceduediligence,particularlyforcompaniesinsensitivesectorslikelogging,landclearing,forestry,mining,andwastetrafficking,whicharealreadysubjectedtomorerigorousassessmentsbyfinancialinstitutions.

Furthermore,financialinstitutionsarealso

implementingproactivemeasuresintheKYCspacetoaddresspotentialESG-relatedrisks.Theseincludeaddressingthemisuseofshellandfrontcompaniesthatcamouflageunlawfulactivities,incorporating

newkeywordsandcriteriaintoadversemedia

searches,andre-ratingcustomerriskprofilesto

accountforillicitESGactivities.Byintegratingthesepractices,financialinstitutionscanbetterdetectand

preventfinancialcrimeslinkedtoenvironmentalandsocialmisconduct,enhancingbothcomplianceeffortsandoverallsustainabilityobjectives.

ByutilizingtechnologiessuchasgenerativeAI,

screeningcanextendbeyondaspecificcompany

toincludethebehaviorandactionsofitspartners,

suppliers,customers,andotherassociatedparties.

Withthehelpofnaturallanguageprocessing,itcanassessunstructureddatafromsourcessuchasglobalandregionalnews,litigations,socialmedia,proxy

voting,shareholderproposals,publicrecordsanddocuments,andinvestigativearticlesinthemedia.

Ourbankhasrejectedthe

onboardingofclientsbasedonthebehavioroftheirboardofdirectorsthatdoesnotalignwithESGconsiderations

GlobalLead,KYCOnboarding,internationalbank

FCCoperations,ontheotherhand,focuslargely

onfinancialtransactions.Institutionswillscrutinize

notonlyacompany’stransactionswithimmediatecustomers,suppliers,andlenders,butalso

thetransactionsthatthosepartieshavewith

theirpartnersthroughseveraltiersofbusiness

relationships.Thisenablesinstitutionstomonitoranextensivenetworkoftransactionstoidentify

suspiciouspatternsinthemovementofmoney.Tofindflowsofillicitfunds,FCCwillattimesincludesome

negativescreeningofnewsreportssimilartoESG,buttypicallyonlyfortheprimaryentity.

Today’stechnologyenablesinstitutionstoexpand

theuseofESGdataandincorporateabroader

scopeofinformationintotheirefforts,creatinga

morecomprehensivepictureofpotentialcriminal

activity.3ESGdataprovidesinsightintotheactivitiesofcompaniesandtheirassociatesthatgenerateillicitfunds,whileFCCinformationrevealshowthosefundsaremovedandconcealed.

Suchinsightsnotonlystrengthenaninstitution’s

abilitytouncoverfinancialcrimes,theyalsomakeit

possibletodosoearlier.TroublingESGbehavioris

typicallythepredicatecrimetomoneylaunderingandotherfinancialcrimes.Thus,theintegrationofESG

principlesintoFCCenablesinstitutionstoanticipatecrimes.Inshort,ESGfactorscanserveasvaluable

earlyindicatorsoffinancialwrongdoingamonganinstitution’scustomers,makingitpossibletopredictrisksandactquicklytostrengthentheirdefenses

againstillicitactivity.

4Dualthreat,dualdefense

GenerativeAIallowsfinancialinstitutionstoscreencompaniesanditsassociatedpartiesatadetailedlevelagainstanextensive

catalogueofpotentialproblemssuchashumantrafficking,childlabor,environmentalviolations,deforestation,andbribery.Thiscanprovide

anin-depthunderstandingofacompany’sshortcomingsacrossESGfactors.

ESGandFCC

Connectingthedots

Tocontendwiththeintersection

ofESG-relatedproblems

andfinancialcrime,financial

institutionsneedtobeon

thelookoutforcriminalswho

areoftensophisticatedand

innovative.Hereareseveral

recentreal-worldexamplesthatmadeheadlinesinthemedia.

InMadagascar,criminalswereillegallyloggingrosewood,aprotectedspecies.In76casesreferredtothecourts,authoritiescitedillegalfinancialflowsof$160millionfromthis

activity,runningfrom2009to2020.Criminalsoftenlaunderedthosefundsthroughthecountry’svanillaindustry,ahighlycash-intensivebusiness.Theywoulddosobybuyinglargeamountsofdomesticvanillatomanipulatepricestohidetheintegrationofillicitfundsintothevanillabusiness.4

In2023,ItalianandGermanauthoritiesannouncedthattheyhadarrested14peopleandseized€90millioninassetsinacaseinvolvinganillicitwaste-traffickingscheme.Officialssaidthatthecriminalgroupillegallyacquiredscrapironthroughanetworkofcompaniesinseveralcountries,andthensolditonthelegalmarketassteelimportedfrom

Germany—withoutproperrecyclingorcleaning.Cashwastransferredthroughseveralfictitiouscompaniesinothercountries,withsomeprofitseventuallybeinglaundered

throughlegitimatebusinessactivities,includingthepurchaseofafootballteaminItaly.5

In2021,theU.S.DepartmentofJusticeannouncedtheindictmentof24peoplefor

humansmugglingandlabortraffickingthatillegallyimportedMexicanandCentral

AmericanworkerstoworkonfarmsinsouthernGeorgia.Prosecutorssaidthatthegroupforcedthevictimstoworkforlittleornopay,“housingthemincrowded,unsanitary,anddegradinglivingconditions,andbythreateningthemwithdeportationandviolence.”

Officialsestimatedthatthegrouphadearnedmorethan$200millionfromthescheme,withthefundsbeinglaundered“throughcashpurchasesofland,homes,vehicles,andbusinesses;throughcashpurchasesofcashier’schecks;andbyfunnelingmillionsof

dollarsthroughacasino.”6

sDualthreat,dualdefense

UnleashingthefullpotentialofESGandFCCdata

WhileagrowingnumberoffinancialinstitutionsandregulatorsseevalueincombiningtheperspectivesofbothESGandFCC,manyarestillintheearlystagesofdoingso—andoften,theyarelookingforwaystoproceed.Formostfinancialinstitutions,integratingESGfactorsintoFCCmonitoringwillberelativelyinexpensivebecauseitinvolvesthemodificationoftwoexistingcapabilities,ratherthanimplementinganentirelynewplatform.ButthereareseveralkeyguidelinesthatareimportanttotheeffectiveexpansionofFCC:

AlignESGandFCC:ExpandFCCnegativescreeningbyintegratingESGfactorsintoframeworksusedforcustomerduediligenceandextendedduediligence,whichisusedforpotentiallyhigh-riskcustomers.ESGattributescan

betailoredtocreateaunifiedsearchtaxonomythatfocusesonuncoveringfinancialcrimeandsupportingFCC,ratherthanbroaderESGissues.Forexample,pollutingariveriswrong,butitisunlikelytoleadtorevenuethat

Despitethegrowing

importanceofESG

considerations,policy

clarityandintegration

ofESGfactorsintoKYCprocessesarestillintheearlystagesacrossmanyinstitutions.There’sa

needforclearerguidanceandstandardized

approaches.

ComplianceOfficermajorEuropeanbank

needstobehiddenandlaundered.

BroadenriskscoresbyfullyconvergingESGandFCC:IncorporateESGinsights,basedonthescreeningofmultiplelevelsofcompanyrelationships,intoperiodicongoingcustomerreviewsandcase

investigations.Inaddition,institutionsshoulddevelopESG

scorecardsforcompaniesandtheirnetworksofrelatedcompaniesforuseincreatingcustomerriskscores.

LeverageGenAItoconductongoingmonitoringwithareductionoffalsealerts:UseofgenerativeAIforexpandedmonitoring

allowsmorefactorsatmorelevelsofrelationships.Thus,itwill

naturallyincreasethenumberofalertsflaggingpotentialcriminalactivities,whichcanbeoverwhelming.GenerativeAIcanhelp

institutionseliminatenoiseintheirmonitoringeffortsandfocusontherightproblemswithminimaleffort.

ExpandtheuseofmachinelearningtoenhanceFCCmonitoring:

Thiscanhelpfinancialinstitutionsstayaheadbycontinuouslyrefiningdetectionmodels,identifyingnewpatterns,extendingscreeningacrossallrelationshipsratherthanjusttheprimaryentity,andadaptingtoemergingthreatsinreal-time.

EnhancingcurrentFCCframeworksandproceduresto

includeESGconcernscanmakeFCCmoreeffectivewhileeliminatingredundantprocessesandreducingtheoverallsupervisoryburden.That’sakeypoint,giventhehighcostsofcompliance,especiallyforinstitutionsoperatingacrossdifferentjurisdictions.Buttherealbenefitsgofarbeyondgreaterefficiency.

ByintegratingESGinsightsintotheirFCCefforts,financialinstitutionscandevelopacomprehensiveviewoftheirriskexposure,enhancetheirabilitytodetectcriminalactivities,andstrengthentheiroverallcompliancemeasures.An

importantlinkbetweenESGandFCCarisesinthearea

ofsanctions,wheresanctionslawsandregulationshelp

institutionsavoiddealingswithrogueregimesandterroristgroupswhilepromotinghumanrightsbytargetingissueslikeforcedlaborandhumantrafficking.ToaddressESG-

relatedrisks,sanctionsscreeninglists,keywords,andlogicareoftenupdatedtomoreeasilyidentifybadactors.

6Dualthreat,dualdefense

Thisapproachhighlightsthegrowingimportanceof

ESGincompliancestrategies,wherethepenaltiesfor

non-compliancecanbesevere.Forinstance,in2020,

anAustralianbankagreedtoa$920millionsettlement

withregulatorsafterfailingtoimplementadequate

transactionmonitoringtoidentifytransfersrelatedto

childexploitation.ByaligningESGconsiderationswithFCCframeworks,financialinstitutionsnotonlybolstertheir

defensesagainstfinancialcrimebutalsosupportbroadersocietalgoals,suchashumanrightsandenvironmental

protection.7

Improvedcomplianceandbetterriskmanagementare

clearandimmediatepayoffsofESGandFCCconvergence,butbringingbothdomainstogethercanalsodriveavarietyofbroaderbenefits.Itcan,forexample,helpstrengthen

aninstitution’sbrandandreputation,especiallyamong

customerswhoplaceimportanceonethicalbehaviorandsustainability.Itcanalsoimproveinvestors’confidenceinaninstitution’sabilitytomanagecomplianceandreducerisk,aswellasincreaseaninstitution’sappealtoinvestorslookingforcompaniesthatembraceESGgoals.

Identifyingtherootcausewithastructuredframework

Tokeeppacewithevolvingfinancialcrimes,regulatorssuchastheEuropeanParliamentregularlyissueanti-

moneylaundering(AML)directivesthatmemberstatesmustimplementintotheirdomesticlegislation.The

latestdirectiveidentifies22predicateoffensesoractivitiesthathavethepotentialtogenerateillicitgainsandleadtomoneylaundering.Similarly,FinCENrecentlyoutlinedkeyAMLnationalpriorities,includingcorruption,cybercrime,terroristfinancing,fraud,transnationalcriminalactivities,drugtrafficking,humantrafficking,

andproliferationfinancing.ThisalignmentshowsthatspecificESGconcerns,suchashumantraffickingand

corruption,areincreasinglyrecognizedascriticalprioritieswithinAMLframeworks,underscoringthegrowingregulatoryfocusonintegratingESGconsiderationstomoreeffectivelycombatfinancialcrime.

OverlapbetweenESGfactorsandFCCscreening

Amount

ofoverlap

ESGpillar

Predicateoffenses

Environment

?Environmentalcrimes,suchaspollution,illegalwastedisposal,wildlifetrafficking

?Illicittraffickingofcertainculturalgoods,suchas

endangeredspecies

Duetolimitedoverlap,thereis

asubstantialopportunitywithin

theEnvironmentpillartoextend

traditionalFCCscreeningpractices.

Social

?Terrorismfinancing

?Drugtrafficking

?Armstrafficking

?Organizedcrime

(includingitsinvolvementinsocialissuessuchas

humantrafficking)

?Kidnappingandextortion

?Humantraffickingandsmuggling

?Sexualexploitation

?Counterfeitingof

currencyand/orproducts,whichcanhavesocial

impactsifpoor-quality

productsharmconsumers

Governance

?Taxcrimes

?Fraud

?Corruption

?Bribery

?Cybercrime(dependingonthetarget,cybercrimecandisruptsocialservicesorcauseeconomicdamage)

?Theftandrobbery

?Illicittraffickingofarms

?Counterfeitingofcurrency,whichcanunderminetrustinfinancialsystems

?Mismanagementof

culturalgoods(poor

governancecanleadtoalackofprotectionforculturalartifacts)

7Dualthreat,dualdefense

Dualthreat,dualdefense

TheconnectionbetweenESG-relatedbehaviorandfinancialcrimeisbecomingincreasinglyevident,highlightingthecriticalrolethatESGcanplayinidentifyingandmitigatingsuchrisks.Leveragingthetechnology,data,

expertise,andsystemstraditionallyusedinAMLprocessestoassessESGriskscreatesamorecomprehensiveandrobustriskmanagementstrategy.Conversely,insightsanddisclosuresfromESGassessmentscanenhanceFCC

compliancebyaddingvaluablecontextandidentifyingpotentialriskfactorsthatmightotherwisebeoverlooked.Thisreciprocaluseofinformationnotonlystrengthenstheinstitution’scapacitytocombatfinancialcrimebut

alsopromotesmoreresponsibleandethicalbusinesspracticesacrosstheboard.

Createsacomprehensiveviewwith

leadingindicatorstosignificantlyenhancetheeffectivenessofcomplianceefforts.

Achievesoperationalefficienciesinnegativescreeningbyleveragingaconvergedframework.

Adoptinga

Dualthreat

Dualdefense

approachoffers

bankstwosignificantadvantages

Asfinancialinstitutionsfaceincreasingdemandsfortransparencyandaccountabilityfromstakeholders,the

integrationofESGintoFCCframeworksbecomesnotamatterofif,butwhen.Institutionsthatembracethis

convergencewillnotonlyenhancetheirriskmanagementcapabilitiesbutalsostrengthentheirreputation,appealtosociallyconsciousinvestors,andbuildstronger,moreethicalrelationshipswiththeirclients.Asthefinancial

landscapecontinuestoevolve,theconvergenceofESGandFCCwillbeessentialinshapi