By Richard Pike , Product Director, Wolters Kluwer Financial Services
There is little doubt that combating financial crime has not only forced its way up the news agenda and into the consciousness of the public at large, but it has also forced its way up the agenda of business leaders in all financial services institutions and organisations large and small. The reputational pain of negative headlines has been exacerbated by the pain of regulatory enforcement for failures and inadequacies of financial-crime approaches and processes to date. We have seen the culmination of this with the FSA Handbook FCC update in December 2011,in an attempt by theoutgoing regulator to put into place more robust processes and industry practices designed to make financial crime detection and prevention a high priority, andfar easier and effective –thus avoidinganother Kweku Adoboli.
For many years, the former and now outdated approaches and views often captured in an historic tick-box culture and methodology were seen to be an impediment, and long overdue for change. Consequently, aligning with UK (and European) changes in UK anti-money laundering/counter-terrorist financing law and Regulations (and Directives), the FSA’s own objectives and thinking has instead deliberately re-focussed and been advocated towards a proportionate and dynamic risk-based approach. This risk based approach is one that is integrated and holistic towards all aspects of financial-crime risk management, and provides for the consequent effective use and allocation of resources. In essence, it remains crucial that firms develop and maintain a sufficient awareness, understanding and articulation around all the important aspects of their own financial crime arrangements and governance controls.
We are in an era where the UK regulatory environment, generally and especially in relation to financial crime, is changing rapidly and becoming more focused on enforcement. It is therefore difficult for regulated firms to simply ignore developments and publications which amount to updated guidance being issued on the FSA’s current approach and expectations. This guidance, and emerging risks in this arena, suggests strongly that firms should implement a broad and holistic governance framework to ensure compliance with financial crime UK law, regulation and industry best-practice guidance.
All fine in principle. However, the fact is that many firms will face significant practical difficulties when it comes to implementing these changes. For many, obtaining a holistic view of all of your firms financial crime control processes- linking to regulations, policies, risks, controls, tests/audits, integrating data from manual and automated processes as well as ensuring that the framework and processes are consistent across all units, products and geographies and that the framework can manage regulatory change - is a big ask. Too many financial services firms still work in silos with little or no communication between business units and departments. However, the message from the rule makers is clear: that is not good enough anymore. Firms will need to gather all this data together, be able to present it to decision makers and regulators when requested, and different aspects of the business will need to not only communicate and share risk information clearly, but also be able to provide an over-arching view across the company of who is doing what, and when, in order to prevent financial crime.
On the face of it this may appear ambitious or, at worst, daunting to many firms, but the good news is that help is at hand. Wolters Kluwer Financial Services has moved to meet these requirements by combining a consultative, knowledge based and technology-driven approach. In practice, that means providing frameworks for managing risk and compliance in a manner consistent with regulations and industry best practice.Our solution offers models, policies, risks and controls that the frameworks will govern and that business units will utilise. This is in conjunction with software systems to manage and measure the risk management processes and efficacy of models, policies, risk and controls, all with Consultant experts to embed the frameworks within a client’s specific environment. The fact is, that such complex overhauls of internal processes will require some, if not all, of these tenets in order to work and, as the financial crime landscape changes, a piecemeal approach is no longer adequate. The regulator has spoken and financial services firms need to react, but they will undoubtedly require help to do this correctly and avoid enforcement actions and fines. By unveiling our new FCG solutions we are doing our best to help make silos a thing of the past when it comes to financial crime.
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