The Basics of Good Controls in Managing Financial Crime Risks Effectively

Robust financial crime controls (anti-money laundering (AML) and counter terrorist financing (CTF)) are essential for organisations of all sizes to ensure they are protected from the impact of financial crime. 

Failing to implement effective controls can have serious consequences, including financial penalties, regulatory sanctions, reputational damage and even criminal prosecution. In 2022, the Financial Conduct Authority (FCA) fined Santander £107,793,300 due to serious and persistent gaps in their AML controls.

In part two of our financial crime series, we unravel the essentials of establishing effective financial crime  controls, how to implement them and the benefits they bring.

Why good controls matter

Ensuring that your financial crime controls aren't just in place but are effective is crucial in the ever-evolving landscape of financial crime (Read our previous blog in this series here). Effective controls not only mitigate risks but also contribute to regulatory compliance, protect your organisation's reputation and safeguard your customers.

Here are some of the key components that go into building robust financial crime controls:  

Risk Assessment

Every organisation should begin by conducting a thorough risk assessment. Understand the specific risks your organisation faces in respect of financial crime so you can tailor your controls accordingly.

Clear Policies and procedures.

Establish comprehensive financial crime policies and procedures that provide clear guidance on how to identify, assess and manage these risks.

Training and awareness.

Equip your team with the knowledge and skills to recognise and address potential financial crime activities. Regular training sessions and awareness programmes are essential to keep your staff vigilant.

Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD).

Conduct thorough Know Your Customer (KYC) checks during onboarding and periodically review existing customer information. Understanding your customers is fundamental to detecting any irregularities in their financial activities.

Transaction monitoring.

Implement robust transaction monitoring systems to identify and investigate unusual or suspicious activities. Consider leveraging technology and data analytics to enhance the efficiency of your monitoring processes.

Reporting mechanisms.

Establish efficient channels for reporting suspicious activities. Encourage a culture of reporting within your organisation and ensure employees know the importance of promptly reporting any unusual transactions.

Efficiency and evaluation

Remaining protected against financial crime risks isn’t a one-and-done exercise; it's an ongoing process. Regularly evaluate the efficiency of your financial crime controls and make necessary adjustments. Consider implementing the following:

Continuous monitoring

Continuous monitoring processes will help you stay ahead of emerging risks so you can adapt your controls quickly.

Data analytics

Leverage data analytics tools to enhance the precision of your controls. Analysing large datasets can unveil patterns and anomalies that might go unnoticed through traditional methods.

Regular audits

Conduct regular audits of your processes to identify areas for improvement. Audits not only help ensure your controls are effective but also align with the latest regulatory requirements.

In part three of our financial crime series, we ask you to take a hard look at your financial crime compliance and assess whether you're meeting your obligations or falling short.

Bolstering your financial crime controls

If you're unsure about the effectiveness, efficiency or standard compliance of your financial crime controls, Brighter is here to help you. With years of experience guiding clients through the intricacies of financial crime control management, we can assist you in understanding, designing, deploying, tuning, remediating and embedding good practices. For a confidential discussion on anything financial crime control-related, please contact Simon Davis today.