Many businesses and traders are exposed to potential legal liability for a wide variety of financial crimes. Minimizing financial crime risk or exposure is critical and requires strict compliance with the state and federal laws and regulations that apply to your industry and business practices.
In this article, Dr. Nick Oberheiden, corporate enforcement attorney at Oberheiden PC, provides an overview of financial crime enforcement mechanisms.
Legal Exposure to a Wide Variety of Financial Crimes
Banks, financial institutions, securities firms, executives and other businessmen occupy an important place in society – one that would be extremely profitable to use for personal gain. To prevent this from happening, states and the federal government have developed a wide variety of laws and regulations, such as the anti-money laundering laws (AML), which prohibit financial crimes and are designed to detect it should it ever occur. Many of these laws even place legal obligations on companies, especially financial institutions, to take appropriate steps to prevent, prevent or detect financial crimes committed by their customers.
Complying with these laws and fulfilling these legal obligations is essential. Violating the law can lead to civil and criminal penalties, while failure to comply with a legal obligation can result in fines, administrative sanctions and reputational damage to your company.
Just some of the financial crimes you should avoid, and sometimes take steps to detect, include:
In many cases, it is not enough to simply not commit the offense or crime. When it comes to money laundering, for example, financial institutions are expected to take many significant steps to prevent their customers from using their bank to launder ill-gotten funds or move them in ways that facilitate further crimes or even terrorism. They are then expected to turn over any information that appears to indicate money laundering and terrorist financing to law enforcement, under a host of federal statutes, such as the Bank Secrecy Act.
The First Step Should Always Be a Risk Assessment
Although the range of financial crimes is extremely wide, it does not necessarily mean that they all belong to you or your company. For example, securities fraud is not something you will have to worry too much about if your company does not handle securities.
Assessing risk or determining your financial crime risks is always the first step in a successful financial crime enforcement strategy and financial crime risk management. Skipping it and going straight to creating a compliance policy for your company would be inefficient – you would spend time taking measures to comply with a law that does not apply to your company – and miss areas of high importance to your company.
Generally, a risk assessment involves an extremely close review of all your business practices to address emerging risks and determine which financial criminal laws and legal obligations even apply to your company. The good news is that this can remove large sets of compliance requirements from your list of things to worry about. The better news is that it can identify the core transactions and practices for you and your company to target with especially strict compliance protocols and isolate them from misconduct.
Create a Compliance Protocol that is tailored to Your Needs and Risks
Based on the needs and concerns identified in the risk assessment, the next step is to create regulatory compliance protocols or internal controls that plug those holes and strengthen those weaknesses. Special care must be taken to protect the core business strategies of your company, as well as those that are most likely to break the law and those that could lead to penalties that you most want to avoid.
Needless to say, a detailed understanding of the laws that apply to your company is essential. It is also extremely important to get the legal advice of a lawyer who has previously brought other similar companies to legal enforcement for financial crimes. That previous experience taught the attorney what enforcement efforts work, and which don’t when the proverbial rubber hits the road.
Compliance Measures Should Be Maintained, Monitored and Updated
Once an adequate compliance protocol is in place, many executives think there is nothing more to do. Compliance has been achieved.
That is not the case at all.
Even the most professionally drafted compliance strategy still needs to be tested in the real world to ensure that it actually insulates your business practices from legal liability or suspicion. Until it is tested and successful, a compliance strategy is only theoretical protection for your company.
You can test your compliance techniques using an internal audit to highlight the elements of the compliance protocol and find where it bends or breaks. Any weaknesses in the enforcement system can be fixed so they can withstand the pressure should a real-life threat ever arise.
But the value of a review does not end there. An effective audit program requires ongoing internal testing of your compliance strategy to ensure that the policies you so carefully crafted are still doing their job. As corporate executive attorney and founding partner of the white collar criminal defense firm Oberheiden PC, Dr. Nick Oberheiden, often tells his clients, “The best compliance strategies are not those that are created and then left to fend for themselves; they are the ones that are constantly tested, updated and strengthened. In many cases, reviewing your compliance protocols for financial crime prevention is the only way to detect potential violations or violations that may put the company at risk. For example, audits can discover evidence that an employee is committing a financial crime, giving the company valuable time to control the situation before it becomes public, or can discover that workers inadvertently fail to uphold their role in the executive structure, putting. the entire company is at risk of legal exposure.”