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4 things you need to know about financial crime

By Bryony Clear Hill, Associate Manager, Ethics Awareness, Association of International Certified Professional Accountants

Fraud, and other financial crimes, affect organisations in every industry and sector, totaling billions in lost assets each year. 

Management accountants have vital skills to defend an organisation against financial crime. Explore Keep your accounts safe: Your guide to combatting financial crime for a deep dive into the role of management accountants in assessing your organisation’s risk profile and developing a governance plan.  

For International Fraud Awareness Week — 15–21 Nov. — here are 4 things you need to know about financial crime: 

  1. Financial crime is more than just fraud 

People often use the word ‘fraud’ interchangeably with ‘financial crime’.  

Fraud is about deliberately misleading another party in order to make a gain and includes things like phishing and identity theft. Fraud is one of the most talked about forms of financial crime, and many organisations have robust fraud controls in place. However, it’s just one aspect of financial crime.  

Organisations need to also be aware of the risks of other types of financial crime. Money laundering, for example, involves routing money through varying bank accounts and often across internationalborders to hide illegal activity. There are strict money laundering regulations in place in many jurisdictions, and Members in Practice must ensure they are familiar with certain obligations.  

Financial crimes can be linked to profoundly harmful current practices, including slavery and human trafficking. It’s important that organisations recognise the whole financial crime landscape and are not blinkered by a focus on fraud.  

  2. The risk is higher right now 

History has shown that financial crimes tend to be more prevalent during economic crises. This is due to a range of factors, including criminals being more desperate for money and organisations making cuts to compliance budgets, weakening their defenses.

The coronavirus pandemic has crashed economies worldwide, so all organisations need to be hypervigilant to the risks of financial crime right now. There are numerous examples over the last few months of criminals gaining access to accounts by mimicking official government communications and threatening fines for noncompliance with lockdown regulations or appearing to offer tax breaks related to the pandemic. 

Remote working may also mean that controls you had in place previously are no longer adequate. Whilst it may feel necessary to save money on things like fraud-monitoring software, this focus will feel short-sighted if the organisation ends up being hit by a major attack.

The FM article, Financial crime during a recession: Key lessons for finance leaders, provides additional detail.  

  3. Your organisation needs a plan 

Financial crime is a major risk — organisations should have a robust plan in place to deal with it. This plan should include: 

  • Board-approved policies and procedures laying out requirements of employees 
  • Policies should include data privacy, gifts and hospitality, conflicts of interest, and expenses 
  • A board-assigned role for financial crime risk 
  • A clear way for employees and third parties to anonymously report potential crimes  
  • A financial crime response plan, detailing how the organisation will process accusations of financial crimes 

  4. You can make a difference  

Management accountants have key skills — you’re perfectly placed to help fight financial crime. It’s often the person who looks at the accounts each day who is best placed to spot when something seems out of the ordinary. 

Even if you’re junior in an organisation, don’t underestimate the influence you can have. If you’re more senior or working in a role focused on fraud, your financial literacy and understanding of risk can be vital in communicating the importance of combatting financial crime to colleagues and leading on the development of fraud response plans.  

Management accountants can make a difference by approaching their work with an inquiring mind, questioning when something feels wrong and asking the difficult questions. Your commitment to ethical behaviour and protecting the public interest means that you must be vigilant to the risks posed by financial crime.