Financial crime has been one of the biggest issues globally for many years now. Everything feels like a game of cat and mouse with no chance for either side to win outright.
However, while financial crime is here to stay, there is no need to let it slip into your company. there Certain methods you can implement to prevent this from harming your business.
in the last 24 months, 46% of the companies surveyed Reported financial crimes such as corruption or fraud. This represents almost half of the market, which means that the majority of businesses remain unprotected.
According to 70% of organizations that have been subjected to crimes, the biggest incidents come from 3 places:
- external attacks
- Inside attacks
- The collision of external and internal sources
Risks are everywhere – and they are Bigger than we can even admit. two to five percent of global GDP is laundered each year, which can be as much as $2 trillion. However, this is exactly what we know. Ninety percent of money laundering activities in the world go undetected every year.
These numbers are not here to destroy you. They are here Asking you to take the necessary actions to prevent fraud To the best of your abilities.
Whatever your business or whatever position you have in the distribution chain, you must Learn how to mitigate these risks. And in this article, we’ll teach you the best ways to do just that!
Understand the different forms of financial crime
Before we move on to the tips on how to prevent flapper crime, we should discuss The most common forms that you may encounter.
Money laundering by trade
When a criminal uses business transactions because they want to hide the movement of unclean cash, they overcharge for services or forge invoices. It can also be classified as Invoice fraud.
Pumping and dumping
This type of financial fraud occurs when criminals inflate the price of a cryptocurrency or a stock, but only artificially to make it more attractive to buyers. Then they sell it and reap the profits.
This refers to the transfer of funds through more than one account and Many small transactions to make them Hard to track.
Many criminals use it dummy companies Based in different countries to make it difficult to find the real owner of the money. It is also a way to hide embezzled funds.
Identity theft is everything from misusing another person’s identity documents to stealing their credit card information. Refers to using another person’s personal information for financial gain.
For example, if you don’t Customer data protectionSomeone might steal their personal data and use it to apply for a loan.
When someone makes an insurance claim for an accident by exaggerating it or for something that never happened, it is considered fraud.
For example, an employee could miscalculate the amount of damage in order to obtain greater workers’ compensation.
That includes insider trading Trading in company secretssecurities, shares and other information on behalf of employees with third parties.
Harvest tax loss
Traders, investors and companies always try to push as little as possible on assignments. They often do this by selling underperforming assets to offset capital gains taxes. This is why governments have introduced Washing the sale rule – To prevent people from taking advantage of the tax code.
Keep in mind that these are just a few of the financial crime incidents that can happen in or to an organization. There are many ways to deceive people todayEspecially with easy access to technology. And we need to talk about avoiding that in your company.
linked “ How to avoid scams in day trading
Tips for preventing financial crime in your organization
Financial crime today is more present, more advanced and difficult to detect. As the Association of Certified Financial Crime Professionals (CFCP)CFCS) He says: “It doesn’t matter what field you’re in, it’s not the same as it used to be.”
Knowing this, here are some tips that can help you protect your business today.
1. Run KYC checks to verify the people you do business with
KYC or Know your customer Often used in banks. It is actually a legal requirement in this area, requires that Institutions know who they are dealing with to avoid financial crime. Performing these checks sounds very easy, but in reality it can be slow and expensive.
One great tip is to do Pre-KYC check To filter out unwanted users instantly and also to reduce the costs that come with it. If you collect data early, it can be very useful for monitoring risk.
To simplify and improve Verify KYC process and its operationsYou must use a comprehensive fraud prevention solution.
SEON partners with AML and KYC specialists to deliver high-quality insights to customers and filter out bad apps for organizations. This will allow you Better data collection Customer due diligence processes, KYC cost savings, and automation of bad app filtering.
Bank Anti-Money Laundering or AML is different from KYC verification. They often come bundled with them to make it safer for financial institutions to operate. In general, the 4 Objectives Know Your Customer We are:
- Verify the customer’s identity
- Avoid money laundering
- protect the bank’s operations
- Ensure that customers have access to financial products and services
These days, this is not just limited to banks. KYC, and even its electronic version eKYC, is being used by new banks, rival banks, and other financial institutions that are moving away from the traditional cryptocurrency model.
The Consequences of not implementing KYC checks It can be severe:
- greater risk of crime. Criminals who can spoof your KYC checks will take advantage of this opportunity Create multiple accounts and resell. Failure to perform KYC checks may increase the risk of becoming a victim of financial crime.
- Heavy fines for non-compliance. These fines amounted to $10.4 billion in 2020 on financial institutions around the world. Today there are anti-money laundering laws applied to financial institutions on a global level.
- damage your reputation. We often see scandals related to financial institutions in the news. If there is a penalty and a fine, this is rarely noticed by the news industry and can seriously damage the organization’s reputation.
If this goes to extremes, it could mean the end of the financial institution. Banks can lose their license if they repeatedly violate KYC laws.
Related “ Why is reputation management important for financial services?
2. Maintain compliance with privacy laws
It sounds obvious, but you’d be surprised how many companies don’t abide by the laws that apply to them.
Privacy is paramount in a business that deals with customer data. In the past two years, regulations and privacy laws have changed dramatically, with that being sure Companies protect information provided by consumers.
Take, for example, CCPA regulations. Many believe that these only apply to organizations doing business in California. However, the California Consumer Protection Act of 2018 changed the rules about who must comply.
Starting January 1, 2023, California Privacy Rights Act It applies that if you are a for-profit organization that collects the personal data of California residents, you need to comply with the regulations even if your company is not located in the state.
Related “ The impact of ASIC-imposed regulations on the commercial market
It’s hard to keep track of all the laws, especially as changes are introduced regularly. Make sure you don’t do it alone to keep your organization compliant and safe from crime. Osano has created software packages that you can use to:
- Collect, track and document consent
- Perform risk assessments
- Produce privacy notices
- Responding to access, deletion, and correction requests
- Manage contracts and share third party data
3. Know all the rules and regulations that apply to your organization
Depending on what your organization does, you must abide by the rules and regulations. Make sure you know all about the rules that apply to you. If following them backfires, find a way to get around them, i.e. avoid the rule.
Take, for example, the Pattern Day Trader (PTD) rule. This was the rule Submitted by the US Congress It is supervised by the Financial Industry Regulatory Authority. According to the trader’s rule that opens More than 4 trades per week In a margin account the minimum balance must be $25,000 at all times.
Now, that’s a high amount and you probably want to avoid the rule without paying hefty fines. To do this, you can:
Of course, the other option is to stay within the bounds of the norm, i.e. open less than 4 trades per week.
Ready to make your organization more secure?
It is your responsibility to protect your business and the data you use for its operations to the best of your abilities. We hope these tips help you make your operations and organization more secure.