June 2020 note from CEO

June 22, 2020

Since we issued our last newsletter an incredible amount of activity has been happening in the financial crime space globally, that it’s made drawing up a shortlist of things to talk about a bit challenging…!

In Australia, the most significant development occurred on June 4th, when Westpac released its 48-page response to AUSTRAC’s statement of claim following the conclusion of the Promontory led Advisory Panel tasked with identifying the primary causes for the well documented failings.

In summary, the Advisory Panel identified three primary causes, which in our experience are common to many regulated entities, these were:

Some areas of AML/CTF risk were not sufficiently understood

There was unclear end-to-end accountabilities for managing AML/CTF compliance

There was a lack of sufficient AML/CTF expertise and resourcing

We have examined this report in more detail in the following article which looks at some of the key observations and recommendations of this report, so that reporting entities can use this to reflect on whether any of these issues would be found if a similar management accountability review were conducted across their business.

Following the announcement to the ASX, Westpac also made an unprecedented decision to claw back over AUD$20m in deferred remuneration as it seeks to hold senior executives accountable for their contribution to the bank’s AML/CTF failures.

At the heart of many AML/CTF failures a recurring theme is the lack of understanding and/or appropriate execution of an ML/TF risk assessment that appropriately provides a framework for critically identifying and assessing numerous ML/TF risk factors, which in turn often results in either missing, inadequate or inappropriate controls required to properly manage the risk.

It is of critical importance for any regulated entity to have a robust enterprise risk assessment in place that is based on sound risk management methodologies, is comprehensive in its examination of risk factors and is able to be understood by first, second and third-line staff. Of equal importance is having a full audit trail that documents and supports the risk decisions that have been made, so that this can be simply explained to the Board and Regulators on request.

We are often surprised by the many large businesses we encounter that are still attempting to execute complex, detailed and critically important processes using spreadsheets which lack the appropriate audit trail required to properly manage financial crime risk programs.

At Arctic Intelligence, we see technology as playing a pivotal role in helping these firms to improve the robustness of financial crime risk and compliance assessments, which provide clear accountabilities for managing AML/CTF compliance and execution of risk assessments using technology provides many efficiencies, which leverage domain expertise and should ultimately result in more efficient deployment of scarce resources – all of which could have made a material difference.

If you are interested in understanding more about how Arctic Intelligence is helping our clients to strengthen their defences through smart-technology for enterprise financial crime risk and compliance assessments, we would love to talk to you. Simply click here to request a demo.

Until next time, stay safe everyone…!

– Anthony Quinn, Founder & CEO Arctic Intelligence

Subscribe to our monthly newsletter below.