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Safety first: anti-bribery and corruption in financial services

Anti-bribery and corruption in financial services

With regulators and enforcement agencies now watching hawk-eyed to see where financial crime exists – and the measures to prevent it – businesses must ensure effective risk assessment across the board.

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Partner and UK Head of Anti-bribery and Corruption investigation and compliance

KPMG in the UK

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Safety first: anti-bribery and corruption in financial services - Anti bribery

As regulators step up their scrutiny of financial services, firms need to be proactive in fighting risk, says Annabel Reoch.

Anti-bribery and corruption measures have risen rapidly up the agenda for financial services firms in recent years. With regulators and enforcement agencies now watching hawk-eyed to see where financial crime exists – and the measures to prevent it – businesses are finally stepping into gear.

No place to hide

The intensified pressure from regulators and enforcement agencies is happening worldwide. The UK’s FCA and other international regulators have developed a hard-hitting combination of measures to monitor and encourage compliance. The UK Bribery Act of 2011, for example, contains a built-in requirement for risk-based and proportionate ‘adequate’ procedures. And punitive fines and penalties are proving a powerful deterrent – as much as $1 billion in one case in the US in 2017.

The work of enforcement agencies has also been boosted by expanded budgets and workforces, leading to far more investigations – and companies and individuals being prosecuted. Regulators and other bodies are collaborating closely, sharing expertise, data and detailed insights to track down unethical behaviour. And we’re seeing a growing number of industry-wide sweeps, with one investigation often leading directly on to another.

Shoring up your reputation

The pressure on the financial sector doesn’t just stem from the regulators and the fear of colossal fines. Firms are increasingly aware this is also about that most precious of corporate assets: reputation. Splash headlines about financial misdemeanours are an ever present threat in a world where stakeholders and the wider public have never been better well-informed – or connected via social media.
And, while regulations such as SMCR have placed a burden of accountability squarely on the shoulders of senior managers, the buck doesn’t stop there. Businesses are encouraging a sense of shared responsibility company-wide to ensure effective risk-assessment across the board.

Six steps to effective ABC measures

  • Be proactive
    Many businesses have tended to waited until a high profile event before assessing whether they have the necessary risk policies and procedures in place. Yet the stakes are too high to be reactive. The further ahead you plan, the greater the oversight you will have – and the more chance of gaining a competitive edge.
  • Take a holistic view
    It’s also essential to review your business end to end to assess where any gaps lie in terms of risk mitigation and due diligence, including global operations and disclosures in multiple jurisdictions. Could, for example, your products or services give rise to ABC risk in, say, the funding of infrastructure projects overseas?
  • Watch out for third-party risk
    Beware of unseen risks further down the line, particularly in cases where there are multiple counterparties to a deal. Third parties can also, of course, include clients and agencies, so following KYC measures is vital. In the case of introducers or agents charged with winning business, question why you are using a particular business or individual. Investigate their role, status and risk profile, including whether payment is commensurate with their contribution. Ensure a clear rationale is in place, with documented justification, and adequate systems and controls.
  • Lead from the top
    A keen focus on conduct and compliance issues must be a board level issue: not only policing business conduct and ensuring that the consequences of all breaches are followed through, but also communicating clearly and consistently that risk mitigation is a company-wide task.
  • Join up the dots in compliance
    Consider the interconnectedness of ABC and other regulations to promote a changing culture. Do you have a coherent approach across multiple compliance functions, to ensure controls are working fully in tandem?
  • Follow relevant news stories closely
    Monitor global and industry specific media to learn about specific investigations underway, including any actions against business partners or competitors, to determine what your own third party risk might be.

How KPMG can help

KPMG has extensive risk expertise across the entire financial services sector. We work closely with top tier banks and regulators, with a unique insight into how to mitigate the risk of financial crime. Technology is key to these solutions. We are currently developing an AI due diligence offering around third party and customers – and using messaging surveillance to identify money laundering and other unethical practices.

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