Financial Crime Compliance – What About the “Little Guys”? – Government, public sector


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Besides a global pandemic, 2020 has been a year in which many big and reputable financial institutions have encountered regulatory challenges. Goldman Sachs (United States, Malaysia) reportedly paid regulatory authorities billions for corruption and fraud failures, Westpac Bank (Australia) paid $ 900 million to settle with Australian financial crime watchdog AUSTRAC AML violations, SEB (Sweden) paid its regulator $ 107 million for lax AML compliance, Commerzbank was fined £ 37.8 million by the Financial Conduct Authority (FCA) for problems AML, and the list goes on! More recently, in March this year, the FCA initiated criminal proceedings against public lender NatWest for allegedly failing to prevent money laundering by inappropriately reviewing transactions related to corporate client accounts in the UK. United.

You would be forgiven for wondering how this is possible and how, despite all the rules and regulations, financial crime has become one of the most profitable industries in the world, generating $ 2.1 trillion per year. LexisNexis Risk Solutions reported that the total projected cost of financial crime compliance in the APAC, EMEA, LATAM, US and Canadian markets is $ 180.9 billion per year. While several factors contribute to these costs, the most notable are increasingly complex regulations, limits on data privacy, and technology and labor costs.

In addition to the money spent to fight financial crimes, the report found that “compliance teams are so stressed that managers worry about retaining qualified professionals.” There are a growing number of personal liability considerations for compliance professionals, including criminal liability for those in certain positions such as the head of a company’s money laundering reports. Therefore, retaining qualified compliance professionals is also an issue facing many businesses.

Many questioned whether the problem lay in the international systems and controls governing financial crime compliance and whether these measures were effective. Is it possible for an organization to achieve full financial crime compliance?

On one side of the fight against financial crime, you have governments, intergovernmental organizations, international organizations, law enforcement agencies and other national and international decision-makers. On the other side, you have private companies that employ an increasingly small pool of financial and compliance professionals. The collective responsibility of all these groups or individuals is to ensure that financial crime is identified, prevented, reported, investigated and prosecuted. In this system, of course, corruption can exist with bad actors who deliberately facilitate or participate in financial crime. However, the majority within the “system” quite legitimately tries to respect and abide by the rules.

Large corporations and international financial institutions such as the ones mentioned above can survive an investigation for alleged regulatory breaches and violations. But most small and medium businesses won’t. What chance does that leave the “little guy”? These companies read such titles with apprehension and fear, not to mention new ones in regulation and compliance, such as real estate agents, high-value dealers, and art dealers, who don’t have the budget or the money. organic skills and experience to meet expectations. How do they manage to come into compliance?

Financial penalties aside, the reputational impact of a financial crime allegation would likely bring a small business to its knees.

With the increasing costs, complexity, liability, and scarcity of compliance professionals, how does a small or medium-sized business achieve compliance? The “solutions market” is full of automated solutions, platforms and technologies. The rise of RegTech and Fintech has promised a compliant “plug-in” solution that will solve and satisfy all compliance requirements and concerns while keeping costs low and customer satisfaction high. However, these promises are often unfulfilled, qualified or insufficient and present a real risk to inexperienced small businesses that invest heavily in such solutions and subsequently fall short of their expectations.

The stakes for small businesses are high because financial crime laws and expectations are a demanding moving target that is constantly evolving. So where is the best place to start? Before small and medium-sized businesses commit to spending large sums of money on ‘all-inclusive compliance solutions’, they should seek the advice of an independent expert to ensure that they are suitably tailored for fight against the specific risks and expectations of their business.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

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