The recent fine slapped on Deutsche Bank by the DFSA is just one example of how watchdogs are taking a serious and rigorous approach to AML investigations. But the prevention phase is at once an opportunity and a necessity, says our AML expert.
The Dubai Financial Services Authority said in a recent statement it had fined the Deutsche Bank $8.4m for "serious contraventions" including "misleading the DFSA, failures in internal governance and in its client take-on and anti-money laundering processes". That is one of the recent examples of how more and more the watchdogs (even in more young jurisdictions) are taking a serious and rigorous approach to anti-money laundering (AML) investigations.
Banks are vulnerable - even if, in theory, they should have been the more equipped - so it goes without saying that thousands of companies in other sectors are still more exposed to AML risk.
The AML prevention phase is at once an opportunity and a necessity. An opportunity because you cannot create values in a company without having developed internally all the tools and the culture that prevent such phenomenon. On the other hand, it is a necessity because otherwise the legal framework will put you off the system. In particular, the reputation risk is a real and difficult-to-manage threat for companies, but not only for the company as an organisation: its executives or employees can be considered directly responsible, personally liable and can also be fined in certain circumstances.
The increase of social media influence and activist sites has made this risk far more obvious than in the past. To enter the web thanks to a potentially damaging news story is relatively easy - but to get rid of it can be a veritable nightmare. At a time when clients rely more and more on information from the internet in research, this is indeed an unpalatable prospect.
Between all the risks underlying the reputational risk, the one paramount is the anti-money laundering risk. Experience, professionalism and casuistry are essential for managing this risk, the sort of risk that can be devastating for an organisation. Sometimes big players like large banks are better able to overcome reputational burdens than small-to-medium ones. The impact of fines and social media can be reduced with large marketing investments which may not be feasible for small/medium groups.
To nudge people to better decisions, we need to understand how they take those decisions. Often their main source of information used for due diligence is a web search without a real prudent procedure and methodology. Nevertheless, every situation can be peculiar and has to be understood with the right competencies.
One thing remains clear, though: the tough approach of the authorities is a demonstration that time is up and all types of organisation have to seriously approach this issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.