Warnings were given as a range of expert speakers from the FCA, the National Fraud Intelligence Bureau and HM Treasury, and more, who suggested that London is becoming the ‘money laundering capital of the world and that detection is a prevalent challenge with external and internal auditing picking up 4% and 16% of fraud respectively and whistleblowing unmasking up to 40% of issues.
Further to this, the pace of technological advancement was also flagged, with the stark reminder that criminals often have equally sophisticated technology at their disposal as firms do, equating to a ‘technological arms race’ to ensure the protection of firms and their clients from evolving new techniques and technologies. They stated that as our daily lives and lifestyles are becoming increasingly impacted by technology so too are the dangers of cyber enabling. Numerous ways to protect firms and clients were also discussed on the day from industry-wide co-operation in sharing information to new police and governmental efforts to issues such as training your staff and educating clients to counteract ‘the human threat’.
Over 100 delegates from across the regulatory, law enforcement and cybersecurity industries attended the event organised by the industry trade body and sponsored by Herbert Smith Freehills and Bureau Van Dijk, The agenda covered an array of financial crime issues such as anti-money laundering, vulnerable clients, cybersecurity whistle-blowing, market abuse and fraud.
The first panel of the day was on whistleblowing and included Hywel Jenkins, from Herbert Smith Freehills and Bruce Forbes, from Prudential. Jenkins stated that “whistleblowing reports are a good source of intelligence for firms and the regulators about potential misconduct. Equally importantly, people feeling confident that issues can be raised without fear of detriment is seen as a key factor in creating the right culture within firms; this is an area of continued focus from the regulators and therefore high up the agenda for firms and their senior management".
The next panel - with Alison Barker, Director of Specialist Supervision at FCA, Jon Cosson from JM Finn, Simon Mair from Brewin, and Craig Arnold from Redmayne - addressed how the financial industry can leverage technology to combat financial crime; Jon Cosson said “cybercrime lists high on most organisations Risk Registers and many businesses have deployed captive controls that meet the evolving threats. Whilst organisations continue to develop their Cybersecurity strategies, it is evident cybercriminals are focusing their attention to supplier chain and clients, which are deemed easier prey. Organisations are as strong as their weakest link, criminals and fraudsters are very aware of this. Businesses need to think beyond their perimeter and reach out to their clients, educating them and developing verified communication channels.”
“Machine learning technologies can help analyse normal patterns of business processing and communication and respond when anomalies occur. Businesses should look to adopt advanced and secure identity management and authentication between themselves, their suppliers and clients as well as improved information protection technologies. Increased coordination and education across industry groups and law enforcement will likely prove essential to make sure the defenders can keep pace with the attackers”, Craig Arnold went on to add.
Svetlana Rhodes, Head of Financial Crime Compliance and Deputy MLRO from the Close Brothers, spoke about the drivers of vulnerability – which can vary and be obvious or hidden, temporary or permanent, such as health conditions, mental health conditions, life events, etc. – and how to protect them against the most common fraud typologies, such as Impersonation, abuse of power of attorney, account takeover fraud, internal fraud, pension scams, investment scams and more. Rhodes also highlighted the importance of financial crime prevention from risk assessment and understanding your client base, policy framework, staff training, reporting channels, identification markers and more, she stated; “42% of pension savers could be at risk of falling for at least one of six common tactics used by pension scams”.
Max Bruce, Cyber Protect Officer – National Fraud Intelligence Bureau, spoke about the cost and scale of fraud, sharing that 741,000 crimes of fraud were reported last year, from up to the total value of £2.2b in victim losses, with only 35% of reports from individual victims. He also highlighted that 86% of fraud was cyber-enabled; 33% by mobile/telephone, 13% online shopping, 12% email, and the importance of staying vigilant to growing mandate fraud. Mandate fraud was said to affect businesses year on year, with over 8,300 reports last year and a reported loss of £180m.
Susannah Cogman and Chris Ninan of Herbert Smith Freehills provided delegates with a regulatory update and Cogman commented “that the anti-money laundering space continues to see rapid regulatory change, with three new EU Directives in the last four years, renewed focus on national and international supervision, and a number of milestones in the implementation of the government’s economic crime plan in 2020. Firms need to stay abreast of developments and adapt their compliance programmes where necessary”. This was further re-enforced by the speech from Catherine Kernaghan, Head of Counter-Illicit Finance & Economic Crime Reform at the HM Treasury who outlined developments in the fifth Anti-Money Laundering Directive, customer due diligence and enhanced due diligence.
The Closing Keynote came from Jeffrey Robinson, said, "When I wrote ‘The Laundrymen’ 25 years ago, there was hope that Britain would take anti-money laundering seriously. All these years later, there has been rhetoric and window dressing. Parliament has never taken serious actions that could show real results”.
Commenting on the day PIMFA Chief Executive Liz Field said: “The conference was a great way to gain some insight from the many experts in this field to highlight the importance of education and vigilance when it comes to financial crime. Technology is advancing every day, which, if mishandled can be used against us. Fraud and cyber-crime is rising and becoming more advanced. We will continue to work closely across the industry, including the City of London Police, the National Fraud Intelligence Bureau, the National Crime Agency, the regulators and our firms to help tackle financial crime and help protect clients.”
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