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.
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.
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.