By: Georisa Chang, Marketing Coordinator
This was a great opportunity for top financial crime leaders, many of whom represent the world’s largest financial institutions, to come together in one place to discuss latest industry trends and regulatory requirements.
Here are some interesting learnings shared at the event:
1. The Panama Papers
To kick off the event, Raymond W. Kelly, vice chairman of K2 Intelligence and former New York City police commissioner, led the morning keynote which highlighted the Panama Papers incident and the regulatory impacts this will have on financial institutions. This massive leak of confidential records from Mossack Fonesca & Co. sheds light on how some shell corporations are often used as shady intermediaries for illegal acts, including fraud, drug trafficking and tax evasion. FIs can now expect a new heightened level of scrutiny as a result of this event.
Kelly asked the question, “What can be done to meet these regulatory requirements?” The short answer: put a KYC program in place and really understand your customers’ primary business. He went on to say, “if it doesn’t smell right, then it probably isn’t right”. It’s in your organization’s best interest to know the business your customers conduct — not just identifying the company, but really understanding their underlying business.
2. Forces are pushing bankers towards de-risking
In another popular session, Safely Banking High-Risk Customers, the question was posed to the audience, “Do you feel the current focus on client risk and risk appetite risk is leading to de-risking?” 75% of attendees responded yes, 22% said no and 3% were unsure.
Ultimately, it’s about understanding your risk tolerance. A panelist highlighted the fact that FIs should not only be looking at detection and reporting, but should be placing a stronger focus on risk mitigation. If you have the proper processes in place, this will help you better manage risk and give you a better understanding of what risk you are willing to take on.
We also learned that sanctions aren’t as black and white as they used to be. There has been a categorical shift in how FIs are working with businesses from other countries. Rather than immediate dismissal of all businesses within those high-risk countries, there’s definitely more flexibility in the approach FIs are taking in regards with who they bring into their portfolios. However, it’s safe to say that more caution is taken with these riskier accounts as FIs are implementing enhanced due diligence.
General consensus reaffirmed that the vast majority of recorded transnational activities are not actually prohibited in designated high-risk countries. This doesn’t mean they are risk free. The point here is that if you are willing to take on more risk, it’s important you really understand the nuances of the countries you are doing business in. It goes beyond just knowing the rules of the US, but really being on top of the global changes as well.
Again, it all comes down to really knowing your business customers and having a solid understanding of what the controls and processes are in those countries. Click here to learn how you can enhance your KYC program.
We’ll also be hosting a webinar on May 5 at 11:00 AM PDT titled Uncover Hidden Portfolio Risk. While transaction monitoring and manual spot checks can help, they can miss other important risk factors that could lead to fines for your organization. Come hear more about the types of risks that could be hiding in your portfolio, and solutions to help you mitigate these risks. Reserve your seat today!