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Survival Kit for Financial Crime

Summary of the Deloitte event 8.3.2017

We held a breakfast seminar at Deloitte in Helsinki on 8 March, 2017 on the theme of Financial Crime. The subject raised a lot of interest among the financial sector professionals, as both new legislation and the resourcefulness of criminals are setting ever evolving challenges for operators to try to keep up with. Below you can see the key messages of our eminent speakers.

Our dilemma is how to keep the bad guys out and at the same time ensure a smooth and swift customer journey.

Sharon Campbell explained that Nordea takes financial crime very seriously and sees its proper management to be not only a matter of regulation but a big responsibility invested in them by clients. "It's the right thing to do."

Challenges lie in how to how to improve FinCrime management simultaneously with improving the customer experience. To add to the palette, Nordea is aiming to put global frameworks in place, as according to Sharon, no bank is actually local, every bank is global. However, local laws and regulations make it difficult to cover all the regulation in each country. Sharon explained that they didn't anticipate the complexity of their organisation and are actually implementing already their third financial crime risk management control system.

Sharon says that FinCrime should be kept in mind all the time when developing new IT platforms and systems, sadly this is rarely the case. "But in the end, it's actually not about changing systems or processes, it’s about changing the mindset and culture of the company. People won't follow processes if they don't know why they are set. This is the challenge."

Sharon Campbell, Global Head of Financial Crime Compliance, Nordea Bank AB

Crime stems for example from a sociological problem, where we create a great vision for people of a certain life but which we cannot deliver. When people want it, but they have no ways to get it, they will might turn to criminal means.

Dr. James Dillon led the participants to a more philosophical discussion and mind path. He started out with a short historical survey and questions around how it is nearly impossible to measure how we have been able to defend ourselves against financial crime since the legislation brought to force in 1989. He pointed out that unfortunately some institutions have actually failed in fulfilling even the most basic of duties: identifying the customers and verifying them by independent sources.

According to James, non-linearity has crept into our society and also into financial crime. He points out, that this non-linearity should be respected by the government, industries and advisors in the market and they should adopt the fact that predictions are useless in the environment.

"The Brits have tried everything and they know what does not work. This means that any human being can rethink the fight against financial crime - their ideas are potentially as effective or ineffective as anybody else's."

James also asked the audience to not settle in talking about risks, but shift the discussion to the threats that are behind the risks. "The threat environment changes daily. How can you quantify this daily threat and make controls to mitigate that threat?"

He ended by explaining that the interest should be in the criminals' intentions and capabilities. "We should be interested in the services we give them and if they will misuse them. Customer Due Diligence is a part of the franchise that enables us to understand predicted behavior versus actual behavior."

Dr James Dillon, Partner in Risk Advisory, Specialized in Financial Crime, Deloitte UK

How do we get through the barrier of offshore companies and legal structures and find the ultimate beneficiary?

The Finnish Financial Intelligence Unit is the sole responsible authority for analysing and clearing as well as disseminating information contained in suspicious transaction reports in Finland. Pekka Vasara went though some of the changes the 4th Money Laundering Directive will bring to Finnish operators.

He asked the question on how to actually know you can trust your client. The Directive recommends that this is done by a holistic risk based approach. At the same time Vasara admits that it’s hard for global players and financial institutions to have the same approach for different jurisdictions, clients and products.

Pekka also pondered the major and broader role supervisory and sanctions have in the new legislation. "Do we have enough resources to go through the sanction regime?"

He concluded by bringing up the discussion going on in Finland on whether the Politically Exposed Persons’ (PEP) process should effect the insurance business as a whole. According to Pekka, if companies follow the legislation as it is now, they have the possibility to evaluate this risk and decide which areas could have the lower risk approach. "During the first risk evaluation round the insurance branch evaluated that there is a risk in non-life, volunteer insurance business, such as car and property insurances. There have of course not been many cases, but there are international examples of small scale criminality involved. Thus I would say that it is too early to rule these out completely."

Pekka Vasara, Head of Finnish Financial Intelligence Unit

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