Financial Services - Assessing ABC Risk

Our second annual AML & ABC Forum will be taking place on from the 22nd - 24th of March 2021 in a completely virtual format. The conference will span over three days, Day 1 comprising of general interest topics for the financial crime community, Day 2 will be AML-focused and Day 3 ABC-focused.

Here we will put a spotlight on one of our panel sessions taking place in the afternoon of Day 3 - the 24th of March. Ahead of our wonderful panelists' conversation, we asked each of them what they think has been one of the major challenges in adequately assessing ABC risk.

"What has been one of the major challenges in adequately assessing ABC risk in your experience?"

Ann Doan, Head of Legal & Compliance - The Norinchunkin Bank :

I think one of the major challenges that we have in this area is the lack of screening data available to identify public servants particularly for domestic UK public servants. I think different public servant roles pose different risks depending on jurisdiction. So without having a data source from which to identify them it is very difficult to analyse interactions within your customer base or staff base on the one hand, and then customer behaviours for AML arising from the predicate offence of bribery or corruption on the other.

For AML we have quite thorough well-established screening programs for things like Politically Exposed Persons ('PEPs'). But obviously PEPs only form a tiny proportion of public servants, so for ABC risk there is still quite a large data deficiency that is a key data component that you would otherwise be using to assess risks. So we are screening things such as a standard starting point for one of the data sources for risk assessment in other areas, AML for e.g. so if you look at a project finance or development project, you don't have the ability to screen a participant against that type of data source to understand if there are any hidden risks that you can't identify through other sources of information available e.g. through production documentation and contract structures. For me that remains one of the major challenges.

David Marshall , Associate Director, UK Compliance - NIBC Bank NV:

Some of the firms I've worked with in the past including clients, have in under investigation for activities involving financial crime, bribery and corruption and there's no doubt in my mind these days that that would come under the senior management and individual conduct rules under the FCA, conduct rule no.1: Act with integrity. And the management conduct rules require you to take reasonable steps to avoid serious breaches including financial crime.

If you're a senior manager who has oversight of the areas and issues concerned, this means you. You cannot walk away from responsibility for these issues, you can't say it was happening before I joined, or its somebody else's problem the organisation will take care of it.  the FCA can come after you personally and take action against you because you haven't.

Simon McFeely, Head of Risk & Compliance - Transfermate:

One of the major challenges in my view is that financial service businesses can fail to consider how bribery and risk scenarios could happen through their supply chain. This is most important where a key supplier might be sub-contracting the work, and depending on the type of service and what country the service is happening in, this could translate into a real risk exposure.

Given that we're talking about financial services here, special focus should be considered around the use of 3rd parties especially if they are supporting on licensing or obtaining authorisations in other countries.

Ana Joli , VP ABAC/ACFTE  - Elavon

I would say two of the majors challenges are:

First, global implementation challenges considering the diverse cultural and social aspects surrounding bribery and corruption in various jurisdictions. Second, challenges on how to effectively use data from third parties due diligence to prevent risk or predict patterns of corrupt behavior.

Both of these challenges have been intensified during the pandemic.