Companies must act now to fight financial crime
4 July 2016
The fight against financial crime is particularly crucial in the UK as our advanced digital economy and large financial services sector make us a target for money launderers, terrorist financiers and sophisticated financial criminals. Anti-money laundering regulations and counter terrorist financing strategies are at the forefront of this fight and companies must act now to ensure they are prepared.
John Marsden, head of fraud and identity at Equifax
Fighting financial crime is a top priority for many organisations, including regulators, and if companies can’t evidence that they have the right checks in place to combat financial crime, the implications can be huge. The multi-million pound fines we have seen issued by regulators prove this.
So, what does this mean for companies operating in regulated sectors such as banking, investment, law and insurance?
It is vital that companies understand their obligations and implement robust anti-money laundering (AML) procedures to identify, verify and screen customers against sanctions, politically exposed persons (PEPs) and relative and close associates (RCAs) databases.
Recently we have seen an increasing number of regulatory enforcement actions due to the failure of organisations to deal with PEPs appropriately. A PEP is a person wielding political power or influence, either in a government position or in an international organisation, and the regulations also extend to their relatives and close associates (RCAs). Such people hold, or have access to, power that may facilitate corruption, or are particularly exposed to bribery or extortion. While these people are not necessarily subject to asset freezing and can therefore be taken on as customers, they must be identified, monitored and subject to enhanced due diligence. The regime for screening is very similar to sanctions, and must be ongoing as people will change status regularly.
A comprehensive and efficient screening process is essential to ensure compliance with the regulations. These processes also help avoid the potential financial penalties and reputational damage of non-compliance. The counter consideration is the overheads from investigating identified matches. It is estimated to cost between £15 and £30 for each case investigated, which means it is important to minimise and filter out the false positive matches.
Regulatory compliance in this area presents challenges for businesses – the sheer volume of data to check clients and prospects against means it is essential for companies to have the right technology on board. It is also important to strike the right balance between compliance and minimising the impact on business operations and the customer experience.
At Equifax, we work with BAE Systems and Dow Jones to deliver a solution to support compliance with existing financial crime regulation, as well as the fourth EU Money Laundering Directive (MLD4). The scope of the directive means that more sectors than ever are impacted. EU member states are required to implement the directive by mid-2017 and the associated regulation applies to any company providing financial services. Companies must prepare now.
For more information please visit www.equifax.co.uk/fraud