As practitioners and leaders in the management of governance, risk, and compliance, we represent companies like yours that look to us to act with confidence in the evolving risk and regulatory landscape.
In this issue, you’ll find a diverse series of articles spanning many of the facet of the operational risk and regulatory landscape that businesses face today – including third-party risk and on-boarding of new customers, perspectives on the current geopolitical environment, virtual currencies and confidentiality.
Articles included in this issue:
Enhanced Due Diligence: Best Ways of Meeting the Requirements and Managing Business Risk – EDD processes create a big challenge to corporations’ and financial institutions’ compliance teams. Read article to find out best practices to determining your due diligence process.
Client On-Boarding: Unpacked and Rewrapped – Broadening and redefining the concept of client on-boarding for financial institutions
Failure to Handle to Conflicts can Land You in Hot Water – This article analyzes the issues in recent conflicts of interest cases and suggests lessons that may assist banks and consulting firms.
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The costs and consequences of non-compliance within financial services firms are greater than ever before. The cost for firms of endeavoring to be compliant has been growing in line with the rapid rate of regulatory change but it is the widespread and myriad costs of failing to be compliant which are now taking center stage. Regulators have lost patience and in a world where super-size fines no longer either shock or deter have moved on to using a wider range of measures to ensure compliant behavior. The wider impact can result in the firm or the individual suffering multiples of the cost and pain of the penalty itself. The ramifications of which will be felt by all stakeholders.
From its original publication in 2008, and the height of the financial crisis, the Cost of Compliance Report has tracked the dramatically changing regulatory landscape. In this time, fines imposed by regulators have moved from millions of dollars to billions. Despite this, firms are continuing to experience super-sized fines as they struggle to adapt to the new compliance environment and increased scrutiny from regulators. In response, regulators have deliberately and intentionally, moved from solely monetary ramifications to include consequences such as increased personal liability, claw-backs on bonuses, enforced changes to business, even the end of a business line or ultimately the end of an entire business. This report gets to the core of 16 separate and increasingly severe consequences of non-compliance.
The term ‘Ultimate Beneficial Ownership’ reflects a recognition that a person in whose name an account is held is not necessarily the person who ultimately controls such funds. This distinction is important because the focus of AML compliance efforts needs to be on the person who has this ultimate level of control. Placing the emphasis on this person is typically a necessary step in determining the source of wealth.
The source of funding paid into an organization’s account does not necessarily mean that it is clean. The correspondent bank may well have put in a report and received consent to send it to you, while law enforcement watches how the funds are being used and gathers more evidence.
Organizations need to make their own decision about the consistency of the funds with the counterparty and whether there is information on which you can form a suspicion of money laundering or not. Appreciate that no one expects you to be ‘police officers’ investigating potential crimes; rather you are taking steps to protect your firm from being used to launder funds.
In order to protect your organization from enforcement action and reputational damage, it is vital that you understand the source of wealth of those with whom you do business. If your clients or counterparties have derived funds from illegitimate means, including bribery, fraud or money laundering, there could be severe consequences. Sophisticated criminals are adept at concealing the source of illegitimate funds and tracking the exact source is not always straightforward.
Organizations around the world choose Thomson Reuters to help mitigate their risk and safeguard their reputation. We offer:
Accelus Enhanced Due Diligence (IntegraScreen): a structured approach to identification and checking UBO of important third parties ensuring up to date and auditable compliance
Accelus World-Check: finding hidden UBO risk in business relationships and extended partner networks by screening customers against comprehensive KYC risk intelligence data