By Tim Barber, Director, Software Solutions, Pitney Bowes
Corruption is the one of the biggest threats to 21 st century society. Eloquently and accurately described by Nigerian president Muhammadu Buhari as a ‘hydra-headed monster and a cankerworm’, corruption and bribery run the risk of becoming endemic in the corporate landscape.
The UK Government has reached an inflection point. It has proposed, in the Criminal Finances Bill, a series of far-reaching changes designed to stamp out corruption, money laundering and tax evasion across the corporate landscape.
The measures will reach far deeper than the current requirement of businesses to prevent bribery and tax evasion. The most significant change for UK businesses under the new crackdown is that failing to prevent money laundering inside businesses will become a new corporate offence. And if an employee is charged with money laundering offences and fraud, the business will be held liable unless it can demonstrate it had preventative procedures in place.
Following high-profile fraud cases such as the Panama Papers and the FIFA scandals, the Bill is likely to be welcomed by MPs and firmly backed by influential figures and establishments. The FCA is issuing record-fines for non-compliance. But when the Bill becomes law, businesses won’t just face regulatory penalties – they will face legal proceedings which have significant consequences. Businesses need to build and refresh strategies and take steps now to prepare themselves for this unprecedented change.
The three main areas to focus on to ensure businesses have robust procedures in place to prevent money laundering and fraud can be summarised as:
1. Refresh your data strategy
Knowing who your organisation is doing business with is probably the single most powerful capability a business has in its fraud prevention armoury. This requires absolute precision in data management: data decays at an average of 2% per month 1 and is prone to error and variation. When you consider the size of many financial institutions and insurers; the disconnected, unrelated systems and platforms holding data for different purposes; the number of different geographic locations; the legacy systems inherited in ongoing M&A activity; and the sheer volume of data, the challenge of verifying a customers’ identity
Businesses are overcoming this with access to software which generates accurate and detailed information on customers, structured in a consistent, transparent way. Entity Resolution is provided by software platforms which take data from multiple sources across a business and determines whether they refer to the same individual, asset or location, driving compliance and ensuring clean, structured data. Businesses can find, link and visualise complex relationships across parties, accounts and transactions. The ability to generate this Single Customer View is more significant than ever before.
2. Begin to create a culture of integrity
Building a culture of integrity and ownership to generate compliance fosters loyalty and belonging. Now, it’s even more important that staff know and understand the legal and regulatory consequences of their actions, whether well-intentioned or otherwise. Well-communicated policies on operations in the working environment, such as clear trading rules of engagement, flexible working policies and guidance on Bring Your Own Device, provide a robust framework for corporate integrity and legal compliance. Companies with detailed compliance training programmes educate staff and give them a sense of responsibility and understanding. They also reduce risk and protect themselves against vulnerability. And in the post-Criminal Finances Bill environment, this can help protect organisations from serious
3. Build in measures to ensure transparency
The new Bill will place the spotlight firmly on absolute transparency in the disclosure of information -transparency of transactions, accounts and entities. For many organisations, public and private alike, transparency is a measurable goal. It isn’t just a trend, it’s a modus operandi. As consumers, we have access to patient records, to MP’s expense reports, to credit checks. This visibility is extending to corporations as they open up and make data more accessible to clients. The Criminal Finances Bill will provide a formal framework for businesses to bring in transparency measures.
Businesses can achieve transparency goals in a diversity of different ways including:
– Enhanced transparency in the clearing and recording of transactions
– Drawing clients’ attention to the small print. Financial services companies are using customer engagement tools such as interactive videos to spell out the small print and explain tariffs
– Outlining plans and processes for the disclosure of information such as financial reports
– Setting high standards for corporate governance
– Avoidance and resolution of conflicts of interest
– Being clear with clients on rules of engagement, and what is acceptable and unacceptable when it comes to incentives and gifts
– Ensuring ethical, transparent leadership, communicating strategic updates and facts behind decision-making
Transparency, accountability and integrity are the foundation stones on which the Criminal Finances Bill is built. Soon, organisations will have a legal, regulatory and moral duty to respond.
1 Source: Netprospex, ‘The State of Marketing Data 2014’