Insights for Organisations Financial Crime

4 ways to ensure your business is risk compliant

03.05.2024 Published: 18.04.24, Modified: 03.05.2024 10:05:43

Experts reveal their top tips for mitigating financial crime risks in 2024

It’s becoming increasingly difficult to ensure your business is compliant with the relevant financial rules and regulations.

From digital currencies to international expansion, the financial landscape continues to evolve, and with it comes new policies and standards that make it hard to keep pace.

As spending on regulatory compliance reached a staggering £30 billion in 2023, there is a growing concern for organizations to avoid the reputational risks and hefty fines that come with regulatory breaches.

Yves Laffont, Head of Risk, Regulation & Compliance at FDM Group, comments:

“Making sure your organization is risk compliant is an integral part of creating a high-functioning, successful business.

“Oftentimes, companies avoid the problem, don’t follow policies, or fail to stay on top of regulatory changes, or adapt their policies to meet the requirements. To get ahead of this, there are a number of ways you can mitigate ongoing risk.

“From hiring subject experts to providing continuous coaching, making these additions is essential to the safety of your business, while helping you avoid legal trouble.”

Here are 4 top tips to ensure that your workplace is risk compliant:

1. Know-your-customer (KYC) 

Know-your-customer (KYC) is a crucial process that businesses undertake to verify the identities of their customers. KYC requires organizations to know who they are dealing with to prevent the risk of fraud, money laundering, and other financial crimes.

It is important for businesses to implement a robust KYC process to protect their customers and their brand reputation. KYC involves several steps that businesses and their agents must take to verify the identity of their customers.

These steps may vary depending on the type of business and the level of risk involved, but they generally include collecting customer information, conducting background checks, and monitoring customer transactions.

The first step in compliance is to make sure your organization has a strong understanding of KYC and how it applies to your company.

2. Hire relevant roles to manage the process

Navigating risk compliance can be a difficult task – especially if you don’t have experts to guide you through the process.

To combat this, it’s important to employ knowledgeable team members, who will be able to implement new strategies and maintain organization.

Hiring full-time staff also allows businesses to have in-house experts and advisors who are able to help fix the problem long-term and stay up-to-date with regulatory changes. Within this, there are a number of roles that may be relevant, from Financial Crime Risk Managers to Due Diligence Officers.

These crucial roles are responsible for identifying, assessing, and mitigating potential risks that a business may face. They analyze various factors, such as market trends, economic conditions, legal frameworks, and internal processes, to identify potential risks. By understanding these risks, they can implement measures to mitigate them before they become a problem.

3. Provide continuous coaching

Compliance training has become a vital component of running a successful business, especially in industries such as the financial sector where regulations are constantly changing, and breaches can have detrimental consequences.

Having continuous coaching processes also ensures employees are aware of and understand the legal and ethical practices they must uphold in their work.

Many businesses may view compliance training as a cost rather than an investment, but the truth is that investing in compliance training can actually save businesses money in the long run – with the average total cost for a data breach reporting to be $3.8 million (£3.1 million).

By implementing ongoing training practices, businesses can avoid legal fines and large penalties. And at the same time, they can improve employee performance, reduce turnover and streamline operations by making their staff more competent when it comes to compliance and mitigating risk.

4. Conduct regular risk assessments

Risk assessment is an important process in the financial services industry. The nature of the industry is such that it involves handling market risk, credit risk, operational risk, and legal risk.

In order to remain compliant with industry regulations, it is imperative that financial services firms conduct regular risk assessments.

Through conducting risk assessments, businesses can identify potential threats, vulnerabilities, and possible negative impacts on the business. These assessments are essential to help reduce and mitigate risks to the business, its clients, and stakeholders.

Once the risks have been identified, the business should develop and implement a risk management plan. This plan should outline strategies for mitigating the risks and reducing the likelihood of the risks occurring. The plan should also detail the actions to be taken if a risk event occurs.

Are you ready to take your global financial crime management to the next level? Contact FDM today to find out more about our KYC PODs model.