Organisations from all industries from around the world are facing ever-increasing challenges to prevent financial crime and other fraudulent actions taking place. Fraudsters are constantly evolving their techniques and target the weaknesses in processes.
One process weakness could affect an entire industry, especially if it were a bank or some other mainstream financial institution. Therefore, it’s important for organisations to stay ever vigilant and stay up to date with ever-changing money laundering and regulatory developments, which are usually implemented because of an organisation’s failure to prevent financial crime.
There is no one method of preventing financial crime but rather a mix of actions that work in harmony to combat fraudsters, these include the following.
1. Implement strong internal controls
Establishing strong internal controls is crucial in preventing financial crime. This can include procedures to verify the identity of customers, monitor transactions for suspicious activity, and detect and report any unusual or suspicious transactions.
2. Conduct regular risk assessments
Regular risk assessments can help organisations identify potential areas of vulnerability to financial crime and take appropriate measures to prevent it. This can include identifying high-risk clients or business partners and implementing extra controls and due diligence measures.
3. Provide financial crime prevention training and education
Training and education are important in preventing financial crime. Employees should be trained on how to identify and report suspicious activity, as well as how to comply with relevant regulations and internal policies.
4. Implementing strong KYC, KYB and AML policies
Implementing strong Know Your Customer (KYC), Know Your Business (KYB), and Anti-Money Laundering (AML) policies is a critical step in preventing financial crime. KYC policies involve verifying the identity of clients and assessing their potential risks to prevent money laundering, terrorist financing, and other illegal activities.
KYB policies involve verifying the identity and legitimacy of businesses and their ownership structure to prevent fraudulent activities.
AML policies are designed to prevent the use of financial systems for money laundering and other criminal activities by establishing policies and procedures to detect, prevent, and report suspicious behaviours.
Strong KYC, KYB, and AML policies can help organisations to identify potential risks and take appropriate measures to prevent financial crime. These policies can also help to protect the organisation’s reputation and prevent financial losses from fraud or other illegal activities.
5. Foster a culture of compliance and heighten its importance
Fostering a culture of compliance is crucial in preventing financial crime. This involves creating an environment where employees are encouraged to report suspicious activity without fear of retaliation, and where compliance with regulations and internal policies is seen as a priority within all organisations.
Financial crime prevention will always be a continuous fight
The steps outlined in this article will help combat financial crime, however there is always the risk that it may happen regardless of your due diligence and processes that you have implemented. It’s important not to sweep any problems under the carpet and hope they go away as with all financial crime problems; they tend to become public.
It’s good practice to be open and clear about what you do if a breach occurs, such as self-reporting it to the prosecuting authorities (SFO) and the financial regulators (FCA). Although there is no guarantee that there won’t be a punishment, they may be willing to hand out lesser fines to those who are proactively reporting financial crime and are genuinely making efforts to prevent future problems.
NorthRow are on hand to help you improve your financial crime prevention processes with our software including KYC, KYB and ID&V, ensuring you are best placed for the continuous fight against financial crime.