Financial crime leads to billions of lost business in Middle East, survey finds

Some 45 percent of MENA respondents in a Thomson Reuters survey had been a victim of financial crime as opposed to 47 percent globally. (AFP)
Updated 24 May 2018
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Financial crime leads to billions of lost business in Middle East, survey finds

  • Some 45 percent of MENA respondents in Thomson Reuters victims of fraud, corruption and bribery
  • 77 percent of MENA respondents deliberately avoided customers, suppliers, countries or industries viewed as most exposed to financial crime.

LONDON: Middle Eastern companies are losing billions of dollars in business opportunities because of fears about financial crime, according to a Thomson Reuters survey published on Thursday.

Concern about the possibility of severe financial and reputational damage due to regulatory breaches leads foreign investors and firms to shun companies and entire regions where they see “heightened risk.”

In the Middle East and North Africa (MENA), 77 percent of survey respondents said that they deliberately avoided customers, suppliers, countries or industries which they viewed as most exposed to financial crime.

“The impact in terms of lost opportunities at both organizational and national level is difficult to quantify, but likely to impact productivity and economic development,” Thomson Reuters said.

The report was conducted online by an independent third party in March 2018. More than 2,000 senior managers at large global organizations completed the survey, from 19 countries.

In a hard-hitting conclusion, the report said: “For the first time our research has put a price on financial crime: three and a half percent of corporate turnover for the 2,373 large companies in our survey alone. That adds up to a staggering $1.45 trillion.”

Financial crime was said to blight individual lives and undermine the ability of governments to provide key services such as education and health. The IMF has shown that it reduces economic growth and social cohesion.

Che Sidanius, global head of financial crime regulation at Thomson Reuters, said that financial crime caused “incalculable” harm around the world. The proceeds of activities spanning bribery, corruption, fraud, and narcotics trafficking have been implicated in the financing of terrorism, human rights abuses such as slavery and child labor, and environmental crime.

“This has serious economic and social costs in terms of the lost revenues to national exchequers that could be invested in social development, and in terms of the impact on individual lives,” Sidanius said.

Other key findings were that 45 percent of MENA respondents had been a victim of financial crime as opposed to 47 percent globally; 96 percent believed that bribery and corruption was an important issue to tackle; 57 percent indicated that the consequences of bribery and corruption meant less government revenue; only 59 percent said that they fully conducted due diligence; and only 60 percent fully conducted due diligence, the report said.


Abu Dhabi Financial Group unit offers to buy Abraaj’s investment management arm

Updated 16 min 21 sec ago
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Abu Dhabi Financial Group unit offers to buy Abraaj’s investment management arm

ABU DHABI: A unit of Abu Dhabi Financial Group has made a conditional offer to buy private equity firm Abraaj’s investment management business for $50 million, according to a document reviewed by Reuters.
The offer from Abu Dhabi Capital Management (ADCM) is well below the $125 million offered by New York-based private equity firm Cerberus Capital Management before Dubai-based Abraaj filed for provisional liquidation in the Cayman Islands last week.
It was unclear whether the terms of the offer that Cerberus made were different from the one made by ADCM.
Abraaj has been bruised by a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp. (IFC), over how it used their money in a $1 billion health care fund.
Abraaj has denied it misused the funds.
ADCM, an ADFG entity based in Cayman Islands, wants to become the General Partner of the limited partnerships, which have committed money to Abraaj’s various private equity funds.
Abraaj acts as the general partner for these limited partnerships.
Some Gulf limited partners — ranging from financial institutions to pension funds and family businesses — in funds of Abraaj had asked ADFG to explore a buyout of Abraaj’s investments business as they were concerned about their holdings, two sources familiar with the talks told Reuters.
Abraaj, which declined to comment on ADCM’s offer, has debt estimated at over $1 billion, sources have told Reuters.
Since the dispute went public early this year, Abraaj has split its investment management business and holding company, founder Arif Naqvi stepped aside from day-to-day running of its private equity fund unit and the firm halted its investment activities.