The widening gap between bigger and smaller high-risk businesses

Widening Gap between Bigger and Smaller High-Risk Businesses

In Anti-Money Laundering, Business by Parvesh ShamdasaniLeave a Comment

In today’s world it is very important to be a dynamic forward-looking company. Many may argue that being a smaller company has its advantages, but in high risk industries this tends to work against you. Here are some reasons as to why growing and gaining economies of scale, larger turnover, and more profit may provide bigger high-risk companies significant advantages over their smaller counterparts:

  • Higher turnover many lead to more business for your associates, and this would make them more inclined to keep doing business with you and close other accounts in the name of de-risking (I have seen this on a couple of occasions, even though the bigger companies had lower compliance standards)
  • When a company is bigger, it tends to give them more negotiating power and they are usually able to get better terms and deals relative to their smaller counterparts
  • More business and higher profits enable a company to invest more in quality human capital, offer more perks, opportunity, and enables them to attract higher caliber candidates from an advanced and more developed labour pool
  • People tend to prefer companies that are perceived to be safe, reliable, efficient, organised, with a respectable and professional image. Bigger companies that invest more in these tangible and intangible assets have a better chance of “making the cut” in higher risk industries and are able to maintain better quality relationships with their counterparties, authorities, and customers
  • Compliance can put a drain on a company’s resources. Whether it is de-risking and removing businesses that are deemed too “high risk” from their portfolio, to all the costs associated with keeping the records up to date, applying effective on-going monitoring, and passing a quality AML audit. This tends to be easier for bigger companies to absorb as they are more able to afford the time, money, systems, and quality labour required

During the compliance crunch it’s the middle-sized higher risk businesses that have been hit the hardest, many having to expand horizontally into other industries to make a living or vertically downwards to become more retail based, with some even going out of business completely. Despite how hurtful compliance can be for middle sized businesses, it is essential to learn, adapt, try to turn their compliance program into a competitive advantage, and continue growing in a positive manner to protect the future of their company.

Business and compliance enthusiast, problem solver, road warrior, police ID check magnet, and half geek whose exploits have taken him around the United States, United Kingdom, Caribbean, India, deep into Southeast Asia and West Africa. Entered the anti-money laundering and high risk field to help develop understanding, contribute research, improve standards, prevent profiteering at the expensive of SMEs, and to protect interests of the average person.
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