Financial crime: systems and control

Financial crime: systems and control

The Financial Conduct Authority (FCA) which regulates much of the finance sector has issued a proposal which updates its guidance on the controls which firms should have in place to prevent the occurrence of financial crimes.  The guidance covers areas such as money laundering, bribery and corruption and is essentially being strengthened to cover areas of weakness with the FCA has identified following inspections.

Although the guidance is aimed at organisations which are regulated by the FCA, taking steps to combat crime is something which affects all organisations and should form part of their governance and oversight remit.  Take the FCA’s comment on corruption for example:

Corruption includes bribery, which is the offering, promising or giving and the requesting or accepting of a bribe. It is an offence irrespective of where it takes place.”

Measures to combat the chance of corruption include assessing risks, setting processes in place to counter potentially corrupt actions and undertaking regular staff training sessions to ensure that employees are aware of the consequences and dangers of corrupt practices or attempted bribery.  In all of this a high level of management oversight will help to reduce the potential for corrupt practices creeping in.

Money laundering too is a potential threat for every organisation.  Whilst certain sectors are naturally more likely to be targeted by money launderers, all organisations have to have policies in place which will prevent financial crime and this includes both money laundering and fraud risk.   From simple procedures such as locking away cheque books and arranging for managerial oversight on all invoices prior to payment; to identifying customers who process large transactions and considering whether payments should have dual authorisation, there are a number of simple fraud prevention measures which businesses can adopt.

For business leaders the watchword in all of this is vigilance.  Risk appraisals should be reviewed on a regular basis to ensure that as a business grows or adopts new practices or technologies it still maintains good anti-corruption practices.  Whenever significant new contracts are in the pipeline the potential risk of fraud, bribery or corruption should be part of the overall appraisal process.  In all of this it is up to the directors to use their judgement and common sense.  As the FCA says, taking the responsibility to reduce financial crime “is not about box ticking or wholesale de-risking. It is about firms getting the basics right – understanding their customers, the risks they pose and managing those risks proportionately and sensibly.”


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