1. Elucidate’s Outlook

Elucidate is committed to performing comprehensive data analysis for the measurement, assessment, standardisation, and reporting of financial crime risk, including money laundering, terrorism financing, sanctions, corruption, tax evasion, and employee misconduct. The genesis of Elucidate lies in a series of systemic misalignments: between respondents and correspondents, supervisors and regulated entities and trading partners and counterparties. This misalignment manifests itself in numerous operational contradictions as well as the ongoing and costly regulatory exposure experienced by several financial institutions. Critically, this focus on regulatory risk exposure often overshadows the commercial, moral and social imperatives behind the need to ensure that all parties are protected from financial crime.

We distinguish between regulatory risk management and financial crime risk. Regulatory risk relates to the risk of not maintaining a programme that meets all legal and regulatory requirements, whilst financial crime risk is the risk of illicit activity being executed by or through the financial institution, either knowingly or unknowingly.

We aim to bring about a paradigm shift in the way the market views financial crime risk management and in doing so to bring greater clarity to financial crime risk, as opposed to regulatory risk. Our position is that compliance is achieved by focusing on financial crime risk and taking commensurate mitigating actions. Compliance is, therefore, a factor which exists to measure the results of risk management against legal and regulatory expectations, rather than being an independent objective.

2. The Elucidate FinCrime Risk Monitor

The FinCrime Risk Monitor relies on the methodology derived from our benchmark, the Elucidate FinCrime Index (“EFI”), to develop indicative risk ratings of institutions based on publicly available data and Elucidate proprietary data. Whereas the EFI uses more than 1200 specific tests, referred to as eventualities, to assess financial crime risk-based on a combination of public data, institutional data, and Elucidate proprietary data, the FinCrime Risk Monitor uses a combination of eventualities and metrics that are based on public data and Elucidate proprietary data only. Elucidate uses public data to develop organisational reputation and geographic risk scores while we use our custom proprietary dataset to develop transactional and customer risk scores. This proprietary dataset is derived from aggregated and anonymised data that Elucidate has obtained from its platform as well as other institutions. If adequate data is available to develop scores for the 4 distinct risk themes, then a full EFRM score is shown. If only enough data is present to calculate approximate scores, then the approximate tier is shown as the EFRM score. The indicative risk ratings shown as part of the EFRM are therefore distinct from the EFI and its scores should not be considered EFI ratings. The EFI rating has less uncertainty as it relies also on the institution's own data. For more information on the EFI, read the White Paper.

Once an institution moves from the EFRM to the EFI, in addition to the aforementioned 4 risk themes, scoring on 5 extra themes to develop a comprehensive risk rating. The full list of themes is below:

  1. Transactional activity
  2. Customer portfolio
  3. Organisational reputation
  4. Geographic footprint
  5. Culture and employee conduct
  6. Bribery and corruption
  7. Sanctions
  8. Products and channels
  9. Governance framework