Fighting financial crime utilising the contingent workforce will be key in 2022
It’s often very difficult to make forecasts in the fight against financial crime, with new tactics and methods of avoidance emerging all the time.
Criminals often modify their methods of generating and laundering stolen money as quickly as the finance industry alters their own regulations and methodologies to keep apace.
Any regulatory changes that aid financial institutions in combating financial crime should of course be warmly embraced, and to stay ahead of the game, financial institutions must assess their technology, processes, and resourcing to ensure that they can deal with potential risks effectively.
With that in mind, and as we enter a new year, what will be the trends or developments that compliance teams can expect to see this year, and how can a contingent workforce ensure your compliance function is up to date with the ever-changing regulatory requirements, whilst remaining also as risk proof as possible?
CEOs be warned – in 2022 expect more letters from the FCA
One of the biggest focusses for the FCA this year will be to ensure that all their Dear CEO letters which were issued towards the back end of last year are being adhered to.
Firms should have by now identified the key weakness and areas of improvement in their risk and control measures. What will be key in this new year is to have these areas of weakness addressed, and at speed. Regulators will not take delayed late action to this lightly. Expect increased fines and penalties in 2022, especially with regards to weekend compliance functions.
Regulators will also be closely watching whether firms are addressing the issues raised in the letter when considering whether to bring enforcement action, and therefore documenting all additional steps taken will be important for businesses to be able to evidence their compliance.
What is needed unquestionably is a speedy solution involving the right skills to strengthen compliance functions efficiently and effectively.
The Financial service bill will increase regulatory demand on your compliance function
As the UK has opted out of Europe’s’’ 6AMLD, the Financial Services Bill will outline key directives for all to follow from a regulatory perspective. Many feel that the bill will be extended to include additional regulatory requirements to help cover all aspects of financial crime, meaning all UK market participants should expect harsher regulations. Business must plan for and expect to invest more time and money into compliance functions in 2022.
Your Q1 focus should include your customers ISAs
In Q1 2022, HMRC plans to evaluate ISA processes and controls to ensure there is no fraudulent activity. It is therefore of course important for financial institutions to be aware of this. Customers may have many ISAs with multiple providers without realising it, but the individual ISA allowance is £20,000, and customers who have more than that allocated to ISAs are breaking tax law.
This is yet another exercise compliance teams should be aware of and actively looking into in the coming weeks.
Fraud and cybercrime will be the crime of choice in 2022
According to comparitech more than 80% of UK organisations experienced a successful cyber-attack in 2020/2021.
Fraud currently accounts for more than a third of all unlawful activity in the UK, with fraud and cybercrime accounting for more than half of all illicit activity. Experts predict that these percentages will rise in 2022 as organised criminals realise the rewards are significantly bigger in financial crime than in other areas of criminal activity.
Firms will need to ensure that their compliance systems and processes are as safe as possible, as criminals are going to be actively looking for weaknesses that they can penetrate. The potential impact and ramifications of an attack or data breach can have can severely negative impacts on reputational damage as well as significant impacts on your bottom line – the average cost of a data breach is currently estimated to be around £4million.
How can a contingent workforce answer your compliance prayers?
A consistent challenge and issue with getting compliance right is that every aspect of your compliance function needs thorough review and improvement, and with compliance teams already under significant BAU pressure, many find it difficult to have a true view of what additional improvements need to be made, and often in a quick turnaround period.
Contingent resource teams can ensure a ‘no stone is left unturned approach’, and in a highly pressured regulatory environment, hiring contingent resource can make a vital difference in understanding the weaknesses of your risk assessments, as well as setting up concrete plans to resolve them.
- Risk assessments will require in depth analysis of all controls. Many businesses however fail to assess specific risks that can in-turn lead to inaccurate business-wide risk assessment. Often, the main contributing factor to this, is that many compliance teams are understaffed and do not have the internal capacity to ensure that any weaknesses are clearly and fully acknowledged and addressed.
- CDD is one area of investigation that is often not adequately performed. As simple as the processes may be, many banks and other financial institutions still do not get it right. Many turn to automation to address these gaps, but the reality remains that appropriately skilled resource is vital to oversee the technology itself. In many cases, transaction monitoring alerts specifically require strengthening, and this can only be achieved by the right mix of people and technology.
- You can automate systems and processes, but you still need people. Technology automation can of course help with repetitive and relatively mundane tasks, but people can and must oversee automation, as well as ensuring that informed and accurate decisions are being made. What is needed, now more than ever, is a combination of a people plus technology solution. Automation of your current AML processes and systems can only take you so far – they need to be purposeful, and the right people will very much be needed to achieve this.
Utilising the expertise of contingent resourcing can offer many firms breathing space in terms of resolving any issues their AML controls may have. Setting up the right teams to ensure any gaps are identified will be key for firms this year as regulators place more pressure on financial service participants to strengthen current compliance systems and controls.
