Public Health Assignment Sample

INTERNATIONAL DIPLOMA IN ANTI MONEY LAUNDERING

Question A

The global pandemic caused by the covid-19 outbreak has had an unprecedented impact on businesses, people’s lives across the world. The public health measures have become a serious concern to the governments of different countries and these governments have taken firm initiatives along with implementing myriad stimulus programs to protect individuals as well as business establishments. Changes in behavior’s and gap in business monitoring activities in organizations have influenced the possibilities of myriad criminal activities[1]. While explaining these growing practices of criminal activities, two common issues like terrorist financing and money laundering cannot be denied. The Financial Action Task Force (FATF) has collected several relevant pieces of information and assessed them to evaluate the impacts of the covid-19 pandemic. FATF has firmly mentioned in their report that along with causing several unprecedented global challenges, economic disruption, and human suffering, the covid-19 pandemic has increased various covid-19 related crimes as well[2].

The President of FATF has made the governments of different countries around the world aware of their responsibilities to keep citizens safe from any adversities caused by critical tasks like terrorist funding and money laundering. These criminal activities have been identified as the foremost priorities of the governments. As described in many studies that the time of explaining a particular problem and identifying mitigation policies, the first stage is to understand the reasons or the way performing crimes. While identifying the major criminal activities that have become severe during the covid-19 pandemic, the FATF has also explicated the context, in which these kinds of crimes are being performed. As observed in the changing practices and consumer activities during the covid-19 pandemic that financial and non-financial institutes especially banks started using online platforms for interacting with customers[3]. So, at a very primary level, companies may focus on their use of online means of communication to interact with customers. As observed in multiple cases that the business firms have limited in-person contacts, due to which they are failing to identify customers and eventually the criminals have the scope of quick exploitation and they are making an illicit attempt to obtain internal control.

In order to avoid risks, at the very initial stage of lockdown in different countries, the FATF suggested organizations use technologies like Sup Tech, FinTech, Reg Tech and all to continue contactless payments and transactions. However, the problem is that all of the digital IDs are not reliable and it is also difficult to identify by checking apparently. To combat this problem and avoid risks like money laundering and terrorist financing, the FATF has provided a set of guidelines. So, the business firms can follow this guide to determine the level of suitability of technology, governance and architecture of Digital ID systems[4]. So, by following FATF’s guidance, firms can control money laundering and terrorist financing risks.

Evading customers due to diligence measures, exploiting insolvency schemes and economic stimulus measures, exploitation of covid-19 and other related economic downturns and misuse of international and domestic emergency funding and financial aid have been identified as some serious vulnerabilities that could lead to serious risks. In order to respond to these adverse situations and vulnerabilities, various measures and strategies have also been explicated and a few of these policies are given below:

• Domestic coordination can be improved and maintained for assessing the impacts of the covid-19 pandemic on anti-money laundering and counter terrorist financing risks.
• Money laundering and terrorist financing risks can be avoided by maintaining strong communication with the private sector[5].
• The complete application of a risk-based approach towards customer due diligence can be encouraged to deal with any discrepancy.
• Supporting digital payment options along with being concerned about their utilization methods.

The case of British bank NatWest can be referred to as an example of money laundering from recent times. As reported in 2021, during the covid-19 crisis, NatWest was fined 264.8 million pounds for a case of money laundering. The bank was accused of its failure in complying with money laundering rules and it was for the first time when the financial regulators of the UK pursued serious criminal charges for this kind of violation. NatWest bank basically failed to take action against criminal activities. Although a few of the workers reported suspicious activities regarding transactions, but the bank authority failed to take action as required. Deposit of cash as checks due to serious systems failure created scope for money laundering[6]. Another example is the Swedish bank, SEB Bank, which was also accused of anti-money laundering failure and certain compliance deficiencies were identified as the main reason for this crime. This case is also during the covid-19 pandemic, in 2020 and SEB Bank was fined 125.10 million pounds as serious compliance deficiency took place in its Baltic operations. Through investigation, a serious discrepancy was identified in the regulations and overall management of systems in SEB Bank as the financial institution failed to fit regulations by considering the purpose appropriately. However, a better and more effective information sharing programme was identified in SEB Bank in comparison to the traditional regulatory compliance[7].

Detailed reports and statements of the FATF President have emphasised the profound impact of the covid-19 pandemic on the society as FATF is also working to constantly update its understanding of the implications of this crisis worldwide. Although myriad strategies have been developed by the FATF to figure out problems related to money laundering and terrorist financing risks, but regular updates and changes are required accordingly along with the changes in criminal activities. Other various digital solutions are also used for supporting information sharing along with detecting and analysing any suspicious activity[8].

Increasing cash circulation in economies as an implication of economic uncertainties and borders closure have been identified as major factors that can influence money laundering activities. By identifying these areas of vulnerabilities and potential risks, the FATF has made the governments aware of where they need to focus. A report by Standard Chartered has contained a detailed analysis of strategies to enhance the risk-based approach of financial institutions to combat financial crimes. The growing concern for money laundering and terrorist financing during the covid-19 pandemic has been prioritised in this report. As per this report, any financial institution needs to be aware of such criminal activities as well as the inherent risks related to anti-money laundering and countering terrorist financing. At the same time, these financial institutions also need to adopt and incorporate a risk-based approach for identification, assessment, and understanding of these risks, to which they can be exposed. Financial institutions also need to consider the requirements of jurisdictions and laws that clarify the currency used by the customers. For example, if the customers want to use USD when they are located in Asia, then the financial institution should follow specific compliance measures in support of the US laws[9]. This is how a risk-based approach can be a strategic initiative to confront money laundering and terrorist financing.

Question B

Unravelling a Risk Based Approach (RBA)

Corporate ethics and compliances are two important aspects of organizational management under the legal and financial dimensions of business. The aspects of organizational management are incorporated by a number of factors and common phrases. Risk Based Approach is one such phrase that is related to the concept of corporate ethics and compliances[10]. So, when you listen to the phrase what comes to your mind. Is it an approach to manage organizational aspects with the priority and focus on specific risks? So, here, we are clearing your confusion and explaining the concept of Risk Based Approach in GSK’s UK jurisdiction.

The definition of risk based approach is quite simple. It is considered to be the way of identifying the highest level of compliance risks for the organization and making the risks a priority to take control of the organization as well as policies and procedures. If the highest level of compliance risks is able to come down to an acceptable level then the approach moves towards the low level of risks. The risk based approach is also considerable as the most useful tool to deal with risks at your organization[11]. Normally, the biggest compliance risks cause the highest level of disruption in business which is focused to avoid by the senior management as well as business regulators. So, how the biggest compliance risk creates challenge and disruption in business, might be the next question in your mind.

The common reasons for disruption in business due to the highest level of compliance risks involves the time spent on investigations, money spend for regulatory settlements, jeopardized business partnerships, and unwanted headlines. These situations create a complication with the involvement of different factors related to a business disruption due to compliance risk. Due to the involvement of business regulators and their perception of the risks, it become quite important for organizations to adopt a risk based approach[12]. This is because the risk based approach helps in providing an understanding to the regulators that the company is aware of the risks and taking necessary steps to deal with the risks.

So, these are the needs and reasons for adopting risk based approach in an organization. However, it might be a concern for you, how the risk based approach is applied in organizations. In this regard, it can be said that the identification of risks, prioritizing the risks are the major and important aspects of a risk based approach. The risk based approach is considered to be effective in organizations to improve the proficiency of risk assessment and responding with an approach of agility. Another key point to mention in risk based approach is the ability to perform a due diligence report on a third party company. In GSK, the risk based approach or RBA is based on the risk management policies and frameworks adopted to execute the work. It ensures the company has a strong policy and procedure for identification, assessment, monitoring, and reporting risk. In GSK, we believe that the risk based approach is an integral part of good management practice. With the approach, we are quite able to maintain and protect patient safety, employees, environment, reputation and company assets. With the consideration of risk based approach, GSK focuses on obligating to the waste management approaches and strategies[13]. The waste management approaches and strategies are a considerable risk in the business of GSK as the company can face major legal issues as well as operation management problems due to the absence of a proper waste management approach.

Question C

In the financial sector, anti money laundering system is important for its presence within the regulated market sector. In this regard, it can be said that automated and electronic transaction monitoring are important to detect any activity related to money laundering, financing of terrorism risks as well as identification of high risk customers or politically exposed persons. Being a start up business in the UK broker market, the presence of automated and electronic transaction monitoring systems is one of the importance for Pepperstone. Automated transaction monitoring is a system under the anti-money laundering concept[14]. The system mainly focuses on analyzing the customer information based on KYC or Know Your Customers to identify the potential risks of the client. Based on the assessment, risk measures are undertaken on the basis of scenarios and rules for investigation and possible disclosure. The adoption of automated transaction monitoring has several importance for a startup business like Pepperstone. Strategic compliance is one of the major importance of automated transaction monitoring activities in the organization. Other than this, the business of Pepperstone involves rapid transactions for its nature and presence in the brokerage business. With the presence of an automated transaction system, the organization can be able to obligate and follow all the procedures of AML. The automated transaction system can help the company to detect any sort of suspicious activities and transactions in the business[15]. For example, a large amount of cash transaction or wire transfer can be detected by the company with the use of an automated transaction system. Eventually, such an approach can help the organization to take preventive measures before the issues can happen. Client profile screening is another important tool or approach in the field of anti money laundering approach. The purpose of doing client profile screening is to identify the risks for the customers based on the risk assessment approach. This approach in organizations is also known as Know Your Customer or Customer Due Diligence. For Pepperstone, it can help in identifying the customers who are politically exposed or possess risk as per the regulations of the government. It can help in combatting financing terrorism and avoid the chance of illegal money laundering.

In Pepperstone, the automated transaction monitoring system is important to implement. However, the automated transaction system implementation process required certain considerations for the implementation process. The system is considered to be the most important tool in the fight against financial crime and obligate to the regulations of anti money laundering developed by the regulators under government[16]. The automated transaction monitoring system is not only important for businesses. However, the banks can also have significant benefits from the automated transaction monitoring systems. This is because the system can inform the banks to be aware of any sort of illegal or irregular transaction. In order to implement the automated transaction monitoring system, Pepperstone is required to obligate certain factors or considerations. An increase in resource demand is one of the major considerations in the business to implement an automated transaction system. In simpler words, the expectation for managing the resources can be increased in Pepperstone with the influence of an automated transaction system[17]. The increase in the number of customer reviews and transactions will eventually lead to enhancing the workload and demand of resources subsequently. The increase of configuration will automatically occur in the implementation of the automated transaction monitoring system. This further can lead the organization to increase the budget of the overall business. The management of data in the business is also going to be crucial in the business of Pepperstone. With the implementation of the Automated Transaction Monitoring system, the amount of data to be transacted will increase. This would also lead the organization to see an increase in the need for IT resources. It can lead to an increase in the work pressure of the organization’s IT department. Governance and ownership of the transaction monitoring system in the company is also required to be considered in the implementation. This factor needs to be defined and agreed upon at the early stage of developing the transaction monitoring system. It is required to be defined and agreed upon at the early stage to follow all the regulations and laws related to the sector.

Question D

The process of escalating the issues to management for review and approval for mitigating and managing the AML risk involves certain factors. The components of process escalation in the AML risk mitigation and management are the responsibility of the team, plan management, documentation, timely reaction and communication. Based on organizational policies and procedures, the IT department team members of the company are responsible to escalate issues to the particular stakeholder group. The organization focuses on escalating the risk or problem to the senior management of the company as a priority stakeholder[18]. The process escalation involves certain steps to execute. At first creation of a culture for effectively using the communicate of the problems is focused under the organization. Avoiding unnecessary and frequent escalation is also needed to focus on the process. The next step involves a meeting between a high level of internal stakeholders. Further, the focus is given to communicating the escalation context and correct data in the company. Following this, documentation is done to identify and explore the reasons for risk in AML. Lastly, the organization focuses on developing strong measures to execute the escalation process. Further, the escalation process in the organization involves the development of a plan to deal with the rising risks. With effective plan management, the organization becomes capable of dealing with the risks as per the legal guidelines. Documentation is also considered an important part of the process escalation in identifying the risks. With the documentation, the firm becomes capable of having track of the problems and prioritizing the issues. The timely reaction is also a considerable factor for the process escalation as it helps in ensuring the stakeholders and teams address the risks and recover from the problem. Effective communication is another part of process escalation in the company. Effective communication helps in managing the risks with a team oriented approach in the organization.

In Pepperstone, the process of client-exiting strategy is based on certain steps. The first step of the client exiting strategy of the company involves the creation of a report of existing clients with the identification of attributes. It is important to start with a review of the client selection strategy of the company. The next step of the client exiting strategy is about understanding the revenue impact. Following the exit of a client, the impact of exit on the revenue needs to be considered under the strategy. The weighted scores of the attributed are also considered in understanding the impact of exit on the revenue of a business. Following the understanding of revenue impact, the focus is given to identifying and scheduling a meeting with the major stakeholders. It helps in developing an understanding and communicating the consequences of the exit on the organization. In the client exiting strategy, the next step includes the identification of alternatives for the clients to be exited. It holds the potential of retaining the clients at the last moment of exit[19]. Further, the step of exiting client strategy in the company is based on the creation of a timeframe for the identified client to exit. The next step in Pepperstone’s exiting strategy is based on the development of an escalation process of the sensitive clients. It can also be considerable for the company to reduce the chance of losing potential clients. Based on the identified exiting strategy, communication plan, customer service plan is developed along with the development of a training plan for the staff to improve capabilities and avoid client exit. The possible consequences of poor exit can have an impact on the reputation and business strategy of the company. The risk of money laundering and exposure of data can also be considered under the consequences.

References

Business-standard, ‘Natwest Fined 264.8 Million Pounds In Money-Laundering Case’ (Business-standard.com, 2021) <https://www.business-standard.com/article/international/natwest-fined-264-8-million-pounds-in-money-laundering-case-121121400021_1.html> accessed 3 February 2022

Conko, G., Kershen, D., Miller, H. & Parrott, W., 2016. A risk-based approach to the regulation of genetically engineered organisms. Nature biotechnology, 34(5), pp. 493-503.

Dobrowolski, Z. and Sułkowski, Ł., 2020. Implementing a sustainable model for anti-money laundering in the United Nations development goals. Sustainability, 12(1), p.244.

FATF, 2021. Covid-19 and the Changing Money Laundering and Terrorist Financing Risk Landscape. [Online] Available at: https://www.fatf-gafi.org/publications/fatfgeneral/documents/mena-reg-tech-2021.html[Accessed 03 February 2022].

FATF, ‘COVID-19 – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/covid-19/covid-19.html?hf=10&b=0&s=desc(fatf_releasedate)> accessed 3 February 2022

FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/mena-reg-tech-2021.html> accessed 3 February 2022

FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/covid-19-ml-tf.html> accessed 3 February 2022

FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2020) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/covid-19-impact-oct-2020.html> accessed 3 February 2022

FATF, ‘Update: COVID-19-Related Money Laundering And Terrorist Financing’ (Fatf-gafi.org, 2020) <https://www.fatf-gafi.org/media/fatf/documents/Update-COVID-19-Related-Money-Laundering-and-Terrorist-Financing-Risks.pdf> accessed 3 February 2022

GSK, 2022. Policy on Risk Management. [Online] Available at: https://www.gsk.com/media/3344/risk-management-and-legal-compliance.pdf[Accessed 03 February 2022].

HASHIM, F.H.M., MOHAMED, S.N.H., ZAWAWI, F.J. and RASHID, N., 2021. Forensic Accounting Skills and the Effective Identification in Money Laundering Activities–Transaction Monitoring Perspective. Journal of Contemporary Issues in Business and Government| Vol, 27(2), p.60.

Kuzniewicz, M. et al., 2017. A quantitative, risk-based approach to the management of neonatal early-onset sepsis. JAMA pediatrics, 171(4), pp. 365-371.

Naheem, M.A., 2020. The agency dilemma in anti-money laundering regulation. Journal of Money Laundering Control.

Pol, R.F., 2018. Anti-money laundering effectiveness: assessing outcomes or ticking boxes?. Journal of money laundering control.

Simpson, A., 2018. The role of transaction monitoring in ongoing monitoring: AML compliance programmes in Canada. Journal of Financial Compliance, 2(2), pp.165-175.

Singh, K. and Best, P., 2019. Anti-money laundering: using data visualization to identify suspicious activity. International Journal of Accounting Information Systems, 34, p.100418.

Standard Chartered, ‘A Risk-Based Approach To Tackling COVID-19 Crime: Lessons For Financial Institutions’ (Standard Chartered, 2020) <https://www.sc.com/en/feature/a-risk-based-approach-to-tackling-covid-19-crime-lessons-for-financial-institutions/> accessed 3 February 2022

Stelzenmüller, V. et al., 2018. A risk-based approach to cumulative effect assessments for marine management. Science of the Total Environment, 612(1), pp. 1132-1140.

VinciWorks, ‘The Biggest Money Laundering Stories Of 2021 – Vinciworks Blog’ (VinciWorks Blog, 2021) <https://vinciworks.com/blog/the-biggest-money-laundering-stories-of-2021/> accessed 3 February 2022

[1] FATF, ‘Update: COVID-19-Related Money Laundering And Terrorist Financing’ (Fatf-gafi.org, 2020) <https://www.fatf-gafi.org/media/fatf/documents/Update-COVID-19-Related-Money-Laundering-and-Terrorist-Financing-Risks.pdf> accessed 3 February 2022.

[2] FATF, ‘COVID-19 – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/covid-19/covid-19.html?hf=10&b=0&s=desc(fatf_releasedate)> accessed 3 February 2022.

[3] FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/mena-reg-tech-2021.html> accessed 3 February 2022.

[4] FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/mena-reg-tech-2021.html> accessed 3 February 2022.

[5] FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2021) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/covid-19-ml-tf.html> accessed 3 February 2022.

[6] Business-standard, ‘Natwest Fined 264.8 Million Pounds In Money-Laundering Case’ (Business-standard.com, 2021) <https://www.business-standard.com/article/international/natwest-fined-264-8-million-pounds-in-money-laundering-case-121121400021_1.html> accessed 3 February 2022.

[7] VinciWorks, ‘The Biggest Money Laundering Stories Of 2021 – Vinciworks Blog’ (VinciWorks Blog, 2021) <https://vinciworks.com/blog/the-biggest-money-laundering-stories-of-2021/> accessed 3 February 2022.

[8] FATF, ‘Documents – Financial Action Task Force (FATF)’ (Fatf-gafi.org, 2020) <https://www.fatf-gafi.org/publications/fatfgeneral/documents/covid-19-impact-oct-2020.html> accessed 3 February 2022.

[9] Standard Chartered, ‘A Risk-Based Approach To Tackling COVID-19 Crime: Lessons For Financial Institutions’ (Standard Chartered, 2020) <https://www.sc.com/en/feature/a-risk-based-approach-to-tackling-covid-19-crime-lessons-for-financial-institutions/> accessed 3 February 2022.

[10] Stelzenmüller, V. et al., 2018. A risk-based approach to cumulative effect assessments for marine management. Science of the Total Environment, 612(1), pp. 1132-1140.

[11] Kuzniewicz, M. et al., 2017. A quantitative, risk-based approach to the management of neonatal early-onset sepsis. JAMA pediatrics, 171(4), pp. 365-371.

[12] Conko, G., Kershen, D., Miller, H. & Parrott, W., 2016. A risk-based approach to the regulation of genetically engineered organisms. Nature biotechnology, 34(5), pp. 493-503.

[13] GSK, 2022. Policy on Risk Management. [Online] Available at: https://www.gsk.com/media/3344/risk-management-and-legal-compliance.pdf[Accessed 03 February 2022].

[14] Simpson, A., 2018. The role of transaction monitoring in ongoing monitoring: AML compliance programmes in Canada. Journal of Financial Compliance, 2(2), pp.165-175.

[15] HASHIM, F.H.M., MOHAMED, S.N.H., ZAWAWI, F.J. and RASHID, N., 2021. Forensic Accounting Skills and the Effective Identification in Money Laundering Activities–Transaction Monitoring Perspective. Journal of Contemporary Issues in Business and Government| Vol, 27(2), p.60.

[16] Singh, K. and Best, P., 2019. Anti-money laundering: using data visualization to identify suspicious activity. International Journal of Accounting Information Systems, 34, p.100418.

[17] Pol, R.F., 2018. Anti-money laundering effectiveness: assessing outcomes or ticking boxes?. Journal of money laundering control.

[18] Naheem, M.A., 2020. The agency dilemma in anti-money laundering regulation. Journal of Money Laundering Control.

[19] Dobrowolski, Z. and Sułkowski, Ł., 2020. Implementing a sustainable model for anti-money laundering in the United Nations development goals. Sustainability, 12(1), p.244.

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