April 18, 2020

A guide for financial crime support

Introduction to financial crime support

Financial crime has become a significant concern for businesses globally. This concern grows from the complexity surrounding the financial sector. Financial crime today is recognised as one of the biggest threats, as it affects the stability and security of the financial sector, market integrity, employees and customers.

What are the main types of financial crime?

• Fraud

• Money Laundering

• Bribery and Corruption

• Terrorist Financing

• Market Abuse

• Information security

How to train employees to fight fraud?

All financial service businesses are under an obligation to train employees on financial crime risks and detection whilst those specialising in roles such as Money Laundering Reporting Officers require further extensive training and the practical steps that should also be taken. Non-financial service businesses should also follow this style of training for best practice.  

Training enables financial crime awareness, strong stability for the business and prevention of financial crime risks.
With the employees becoming the front-line defence of the business, this creates excellent motivation and increases their knowledge significantly.

Teach employees to watch for external fraudsters, money laundering flags and terrorist financing indicators through training in these areas:  

• New account fraud – Setting up accounts based on stolen identities or personal information.

• Credit card fraud – Using stolen credit cards.

• Cheque fraud – Using fake cheques to cash in sums of money.

• Phishing – Attempts to receive personal or company information that can be used to commit identity fraud.

• Invoicing for products and services that were never provided.

• Identify theft – Using another individual’s personal information without consent.

• Placement, layering and integration of funds into the financial system for illicit purposes.

• Indicators of terrorist financing and how this has become more popular with the rise of alternative payment methods.

• How to submit Suspicious Activity Reports (SARs) and engage with Law Enforcement globally.

If a business deal sounds too good to be true, it most likely is. The business CEO needs to know precisely what is occurring in the business and who is responsible for this. For example, during the recruitment process it is essential that adequate vetting and background checks are carried out to understand the profile of your new hires.

Risk assessments should also be carried out to:

• Identify the areas which the business is most vulnerable to financial crime; and

• To develop a strategy to eliminate the possibility of financial crime being committed.

Employees should be taught to watch for internal fraud as well as other areas of financial crime.
This could include:

• Segregation of duties so that no one employee is responsible for a whole chain or process;

• Have multiple employees overlooking payroll, deposits, bank statements and profit and loss statements;

• Cross-training employees to perform basic financial functions.  

Providing effect training allows the business to be less vulnerable to financial crime, and builds the knowledge.

How should a firm react to a suspected fraud?

The following steps are seen as crucial to dealing with suspected fraud in a business.

1. Treat the allegation with absolute confidence and inform those who need to know.

2. Ensure the client is not “tipped” off.

3. Appoint a team of employees to deal with the internal ramifications.

4. If your business has appointed an investigation company, ask for a detailed proposal of recommendations for the business.

5. Ensure that the business has fidelity insurance and double-check the notification period.

Why is the financial sector vulnerable to financial crime?

Through the years, financial services have become more sophisticated, this is due to the innovation of technology. Therefore, it has been a great challenge for the financial sector to be aware of the latest financial scams always. Another problem has been the rise of internal fraud being committed as well as external. The victims of financial fraud are mainly the customers of the business; therefore, the business needs to ensure this does not happen to their customers.

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