Trends and future developments for risk-management Flashcards
CRIME
What is a crime?
To be convicted of a crime, what 3 conditions must be met?
In the context of business, crime can be classified into what 4 categories?
= an unlawful act that merits a punishment, usually in the form of a fine or imprisonment.
To be convicted of a crime, certain conditions must be met:
1. The crime takes the form of an action
2. There is no crime without intent
3. Both act and intent must occur at the same time
(1) Offences against an individual
(2) Offence against property or services
(3) Violation of laws
(4) Other offences
CRIME - OFFENCES AGAINST AN INDIVIDUAL
Name 3 examples of workplace violence against an individual.
Victims of such violence would generally be entitled to what?
Certain occupations come with a greater risk of such offences occurring, including roles where employees are what? (4)
- Battery / assault
- harassment
- intimidation / threatening behaviour
monetary compensation
(1) responsible for money
(2) working in dangerous places
(3) working in places where alcohol is distributed
(4) working during times of day where crime is more likely to occur
CRIME - OFFENCES AGAINST PROPERTY OR SERVICES
What is theft?
Name 3 examples.
Theft: e.g. Larceny, embezzlement, robbery, fraud - involves taking what belongs to someone else and keeping it
(Robbery involves an act of violence, whereas embezzlement is often related to misappropriation of funds)
- Cybercrime = a hacker stealing material non-public information for a ransom
- employees using stolen property =company computer or time for personal use
- forging documents to commit fraud
CRIME - VIOLATION OF LAWS
Violations of certain laws can be considered a criminal offence.
Name 4 examples.
CRIME - OTHER OFFENCES
Name 2 other offences.
- Anti-trust: covers activities that restrain trade and supervises M&A to prevent any one participant dominating the market.
- Environmental laws: Inappropriate disposal of waste from manufacturing activities can carry criminal penalties
- Food and Drug Act: organisations may face a criminal punishment for misbranding and misrepresenting the benefits of their products and services.
- Terrorism Act - The Terrorism Act 2006 creates crime offences for organisations that encourage and support acts of terrorism.
(1) Extortion e.g., blackmail
(2) Bribery =act of crime that involves a wilful corrupt payment (or receipt of such payment) for official action from a public official within the government
CRIME - COUNTERING WORKPLACE CRIME
Name 6 examples of how to prevent crime in the workplace?
Name 5 ways to prevent cyber crime.
- Use of external firms to run background checks
- Clear policies, checks and procedures
- Continuous training
- Regular audits (areas that handle money, payments, receipts) to identify early signals
- Security cameras
- Proper RM to identify vulnerabilities.
(I) password-protected firewalls
(II) up-to-date antivirus software.
(III) Employ specialist firms to help identify and fix weak spots
(IV) Continuous employee training
(V) back-up processes of the key records
FINANCIAL CRIME
What is financial crime?
Name 4 examples.
What are the 3 main impacts of financial crime on organisations?
In the UK, what happened in 2017?
Financial crime covers any type of criminal conduct that relates to money, financial services or financial markets
Examples:
(1) fraud or dishonesty;
(2) misconduct relating to financial markets and information (e.g. insider trading)
(3) handling the proceeds of crime;
(4) the funding of terrorism
Impact of financial crime:
1. Direct financial loss (e.g. employee or external party committing fraud)
2. Reputation and brand loss,;
3. Legal and regulatory sanctions due to a breach of financial crime laws and regulations
New anti-money laundering (AML) and countering financing of terrorism (CFT) regulation came into force
FINANCIAL CRIME - ANTI-MONEY LAUNDERING
Most countries have anti-money laundering laws and regulations. What are they intended to do?
What is money laundering?
Name 2 examples.
What do anti-money laundering laws and regulations require?
What are the consequences of non-compliance?
Intended to prevent individuals and organised crime groups from using the monetary proceeds of their illegal activities.
= the concealment of the origins of illegally obtained money
(1) E.g., pay the cash into a bank account OR purchase high value goods, which may then be sold on to make the proceeds appear legitimate
(2)Money could be laundered through a company, whereby over-inflated cash payments are made for goods/services that may/may not exist
Require organisations that fall within the scope of these laws and regulations to use a range of control measures to prevent money from being laundered
Regulated organisations that do not implement compliant controls, or which permit money laundering deliberately or by error or omission, can face serious sanctions = large fines and imprisonment of senior staff and directors
FINANCIAL CRIME - ANTI-MONEY LAUNDERING
What is the most recent anti-money laundering law in the UK?
What did this enhance? (4)
Sanctions and Anti-Money Laundering Act 2018
Regulation enhanced the rules in relation to:
1. customer due diligence;
2. further limitations on the ability to rely on third-party anti-money laundering controls;
3. the provision of electronic money (crypto-currencies, such as Bitcoin) and pre-payment cards
4. the enforcement of sanctions against non-compliant organisations.
FINANCIAL CRIME - COUNTERING THE FINANCING OF TERRORISM
Growing concerns about terrorism and the funding of terrorist activities have led to enhanced laws and regulations.
Why does terrorism require funds?
How can terrorist gangs finance their activities more easily?
Why is the financing of terrorism difficult to detect?
What is the difference between money laundering and terrorist financing?
Terrorism requires funds to plan attacks, purchase equipment and train attackers.
Terrorist gangs can finance their activities more easily if have access to the wider banking and payments system to facilitate the transfer of funds.
Difficult to detect since legitimately earned funds can be used (e.g. donations from sympathizers)
With money laundering, a crime has to occur before the funds enter the banking system, making it easier to link funds to specific crimes.
With terrorist funding, the crime occurs after the funds have been made available via the banking or wider payment system
FINANCIAL CRIME - COMMON AML AND CFT CONTROLS
What is the risk-management process for anti-money laundering and controlling the financing of terrorism?
In terms of identifying and assessing AML and CFT risks, organisations do what?
How? (2)
= a similar process to other types of risk-management = identify, assess, monitor, and control
Organisation determine if and how their products and services could be used to launder money or support the funding of terrorism by:
- Identifying the products, services, stakeholders (customers and third parties) and physical locations that are most at risk of money laundering and terrorist financing activities
- Assessing the level of exposure (probability X impact)
FINANCIAL CRIME - COMMON AML AND CFT CONTROLS
In terms of monitoring and controlling AML and CFT risks, organisations do what?
Name 8 examples.
Implement controls and monitoring arrangements including:
- develop appropriate policies and procedures to co-ordinate control activities;
- establish roles and responsibilities e.g., appoint MLRO to oversee AML and CFT activities
- report any suspicions of money laundering or terrorist funding activity to the relevant authorities;
- establish due diligence arrangements e.g., KYC and identity checks
- establishing dual control and segregation of duties controls
- Monitor transactions to search for suspicious activity: e.g. accounts used for money laundering may receive occasional large cash payments followed by frequent smaller withdrawals;
- Training for employees; and
- AML and CFT compliance reviews and internal audits
FINANCIAL CRIME - COMMON AML AND CFT CONTROLS
What types of organisation are required to comply with AML and CFT regulations?
Where are AML and CFT regulations most common? (4)
A wide variety of organisation types e.g., accountancy firms, banks, estate agents, insurers, lawyers
AML and CFT regulations are most common where organisations:
1. make, receive or facilitate large cash transactions (in the UK and Ireland this means transactions that exceed €10,000);
2. provide credit (such as loans and sometimes trade credit);
3. offer products that provide investment returns; and
4. provide certain types of insurance service.
FINANCIAL CRIME - REPORTING A SUSPICIOUS TRANSACTION OR ACTIVITY
Where money laundering or terrorist activity is suspected, what is submitted and to who?
How?
What information is provided? (5)
What is suspicious activity?
Who do employee report suspicious activity to?
Who is the nominated officer?
Where suspicious transactions or activities are identified, UK authorities have a range of sanctions under the Sanctions and Anti-Money Laundering Act 2018, including what 2 things?
Submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA)
via a secure online system on:
1. nature of the suspicion;
2. date and location of the event;
3. whether the individual is believed to be a suspect or victim;
4. the personal details of the individual engaging in the activity; and
5. the individual’s account details where necessary
Definition of ‘suspicious activity’ is very broad and includes any transaction or related activity that might be considered unusual
Employees should report suspicions to the MLRO/nominated officer who will decide whether to pass on to the NCA
= may be anyone with suitable skills, training or experience = It may be a SM within the compliance function, or cosec/governance professional
Imposing restrictions on where/how money may be transferred and freezing and seizing economic assets
BRIBERY AND CORRUPTION
What did the UK Bribery Act 2010 establish?
Organisations are expected to implement what?
What are the 6 principles?
An organisation that has implemented adequate internal controls prior to the occurrence of an offence can do what?
Established a liability for organisations whose employees commit an act of bribery
Organisations are expected to implement internal control mechanisms based on six principles:
- Proportionality = Internal controls should reflect the size and the risk profile of an organisation
- Top-level commitment = senior management should promote a zero tolerance policy
- Risk assessment = Orgs should be proactive in researching and identifying risks
- Due diligence = Orgs should also have sufficient knowledge of third-parties who represent and perform services on behalf of them.
- Communication = Organisations are responsible for communicating policies and procedures to employees and 3rd parties, including mandatory training
- Monitoring and review = organisations should ensure that internal controls framework is adequate, effective and reflective of current and emerging risks
Can shield itself from corporate liability
POLITICAL RISK
What is a political risk?
Name an example.
What are the 2 categories of political risk?
How are political risks managed? (4)
Political risk = a risk an organisation may face as a result of political changes/instability
e.g., Country sanctions
(1) macro risks - The consequences will affect the whole country.
(2) micro risks - specific to an organisation or a project carried out by an organisation.
Managed by:
1. defining the appetite for such risks
2. conducting appropriate cost benefit analysis of political risks
3. Risks that cannot be mitigated (through insurance, for example) should be monitored and regularly reviewed
4. Communicate and enforce political related policies and procedures and deliver training
