As the risk of fraud, money-laundering and financial crime grows amid waves of new technologies and geopolitical changes, institutions like the European Commission (EC) need a comprehensive understanding of private companies.
As part of these efforts to tackle financial crime, the EC’s Anti-Fraud Office has agreed a €34m deal with Moody’s Analytics to be its provider of company information and data. Selected EU institutions, including Europol and the European Banking Authority, will have direct access to Moody’s Orbis database, which provides company data, information on connected individuals and comprehensive risk indicators.
The database provides intelligence about more than 460 million entities worldwide and at least 450 million individuals. Through the four-year framework, Moody’s will support the EU institutions with research, policy-making, foreign direct investment screening, law enforcement and judicial co-operation.
Hand holding
Education and learning form a part of this, with the Moody’s team offering support to different departments and director generals within the framework about how institutions can best use the Orbis database. “It’s about working with the EC as it adopts the data, as well as the ability to innovate together,” says Keith Berry, general manager of know your customer solutions at Moody’s.
“Many governments are thinking about sanctions, which brings quite a focus into opaque ownership structures that can hide sanctioned individuals,” he says.
When assessing financial risk, understanding company ownership structures is essential. This can be challenging for governments or institutions which rely on using corporate registries assessed on a country-by-country basis. Instead, Moody’s database enables the EC to comprehend company ownership details and structure quickly, with links between different individuals, companies and countries already illustrated.
When assessing financial risk, understanding company ownership structures is essential
These links can be complex to discern. Mr Berry says that the Moody’s database shows instances where ownership linkages are more than 10 layers deep. Within the database, they track more than a billion ownership links between companies.
“We essentially bring together data on companies around the world and then create the ownership links, mapping out who the company is in relation to who the owners are, who the directors are, who the beneficial owners, and so on,” he says.
Ownership structures are especially relevant for governments and entities enforcing sanctions, which are now at a 10-year high. Through analysing links between people, companies and organisations, investigators often uncover common repeating patterns over time: circular ownership structures may indicate issues with a company’s financial flows, while other patterns might illustrate multiple companies registered to one address, or the same person listed as the director for a myriad of businesses.
Legitimate or not, Moody’s datasets will quickly enable its EU partners to identify patterns like these, which can also be used in subsequent investigations.
Pandemic proves growing importance of data
The Covid-19 pandemic saw an increased focus on supply chain risks, often pertaining to determining where a company is based and how its structure operates. Moreover, pandemic-related initiatives introduced new challenges relating to how companies apply for grants under different government support programmes. Problems arose which varied from country to country, typically involving fraudulent applications to attain business relief payments.
Ultimately a question of access to information, Mr Berry points to cases like these as examples which illustrate the pressing need to build and obtain data about companies quickly and reliably.
Covid-19 accelerated the digitisation of many organisations’ customer and supply chain interactions, their internal operations and various digitally enabled products. While moves to online platforms across sectors have added difficulties in tackling financial crime and fraud, it also increases the digital footprint through which to trace it.
As the data grows, the ability to harness it becomes increasingly important, with continued investment driven by technological advancements.
As Mr Berry says: “It’s about the exponential risks that companies are dealing with.”
