Coronavirus and Financial Institutions—How Compliance Programs Should Respond
23 Mar 2020

Like any industry, financial services anticipates disruption from the new coronavirus.

Government agencies and economists expect most everything—from employment to GDP to inflation—will be affected. As organizations large and small tighten purse strings to brace for impact, how can financial services institutions ensure services are not disrupted—or, even more concerning, compromised?

In times of uncertainty, managing risk can be difficult. However, for financial institutions, opportunities remain to mitigate from within. The time is now for anti-financial crime (AFC) leaders to consider all options and establish a thorough plan. It is not too late to safeguard the business from the damages that can ripple from unforeseen external circumstances—and once the dust has settled, leaders must revisit this plan and implement lessons learned to prepare for the next issue that will arise.

Have a Plan—Use Technology to Meet Regulatory Requirements

It should not be unexpected that during this period of uncertainty, regulators may have questions about risk mitigation—particularly for institutions under the guidance of an enforcement order. AFC risk impact and mitigation must be addressed in firms’ business continuity and crisis management discussions. There must be ongoing transparency with regulators, key internal stakeholders, and monitors.

Over the last 18 to 24 months, organizations have been buzzing about technological advancements that help analyze and flag large-scale transactional data, alleviating pressure on anti-money laundering (AML) and anti-bribery and corruption (ABC) teams. Today, that technology will show its strength.

Financial institutions should lean on proven technologies—not just those enabling teams to work remotely, but those that help teams perform tasks seamlessly and more effectively. For institutions under the watchful eye of regulators for remedial efforts, there are likely milestone commitments with monitors that need to be met. It is critical organizations still try to meet these, even if it means that internal projects—like leadership or staff reorganizations—are put on hold. 

Explore Regional Support Systems for Teams

Often in banks, the model is that regional teams only handle escalations and approval requests that relate to their own region. Considering a possible strain on team capacity, this will need to change as teams adapt to meet organizational needs. Regions with greater capacity can support regions that are resource scarce, such as those that are experiencing government-mandated quarantines or limited staff due to an outbreak.

This scenario exemplifies why consistent global standards and processes is critical. In theory, all regions should assess ABC risk the same way, with limited regional variations in approach. It may be that teams can be repurposed to help manage critical day-to-day risks.

For instance, teams within a testing and quality assurance function often have a solid understanding of AFC risk and could support that function. This may require a change in mindset—whereas teams are typically used to working in silos, external factors may require them to band together.

It may be plausible to split responsibilities for AFC teams or team members across multiple locations, in case one region is disrupted. This mitigates the risk that the whole team ends up in a self-isolation situation or ill, and helps ensure processes to meet obligations are still moving ahead. Tone from the top is key to executing successfully.

By Joanne Taylor, K2 Intelligence Financial Integrity Network, 19 March 2020

Read more at Bloomberg Law

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet