In Focus Consumer Credit
Financial crime – not just a risk for big businesses
The potential effects of failing to prevent financial crime go further than lost business and opportunity
Steve Budd COO and MLRO, Investec Asset Finance Group
steve.budd@investec.co.uk
Financial crime is an ever-present risk for brokers and lenders alike, going far further than fraud. The term covers a wide range of activities, from making purposely inaccurate applications for credit to channelling funds to terrorist organisations or laundering proceeds of organised crime. Guarding against this is not just about
protecting the business: it is a regulatory requirement, with serious potential consequences for firms that fall short. The FCA has the power to impose criminal, civil, and regulatory sanctions for those that do, from instituting prosecutions to levying fines or simply issuing warnings. Even a simple statement may have damaging consequences. Larger firms may even find themselves winning the attention of the US Justice or Treasury departments: if they have a license in the US, they are in the ambit of local regulators, and there have been notorious recent cases of UK businesses reaching costly settlements to avoid full prosecution. Amongst brokers, firms lending from their
own books – and, therefore, entering into regulated credit agreements – have the biggest regulatory obligations. They are subject directly to the Money Laundering Regulations and, as they make their own collections, are responsible for detecting and resolving attempted financial crime throughout the lifetime of credit agreements. These firms must implement adequate
systems and controls, from on-boarding and Know Your Customer processes for new customers, through to anti-fraud training for staff, monitoring, and very robust data- security practices. Smaller brokerages, especially firms that do not lend from their own book, but simply
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introduce borrowers to credit providers, have more legal responsibilities to address potential financial crime than they might realise.
Scale and nature The FCA believes that these firms should – subject to the scale and nature of their business model – consider emulating the controls required of their regulated peers. Because they work in the regulated sector, they are subject to the Proceeds of Crime Act and the Terrorism Act, even if they are not subject to the strictures of the Money Laundering Regulations (MLR). They must report to the National Crime Agency any knowledge of, or suspicion of,
a person engaged in laundering money or assisting in terrorism. Many firms, in this position, choose to
act as though they were subject to the MLR, with some larger businesses appointing a money-laundering reporting officer. Even for firms that are regulated by the
FCA, it does not impose a specific approach and allows businesses themselves to decide how best to meet their obligations. Ongoing monitoring is, however, always
important, including keeping data on clients up to date and screening regularly for sanctions. For smaller firms, this can be done manually; bigger businesses, with thousands of clients, may need something more automated and there are third-party providers who provide that service. Whatever the size of your business, the
Even a simple statement may have damaging consequences
www.CCRMagazine.co.uk
way you achieve compliance is up to you. But the FCA’s flexibility, based on size and business model, is not a license to race for the bottom: it is ready and willing to take action against firms that fall short. CCR
June 2017
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