Managing financial crime risks during COVID-19 Pandemic

december 19, 2020 News Releases 0 Comments

§1. Introduction

The COVID-19 Pandemic still continues to grow with increased impact on the Dutch economy triggering business continuity and crisis management responses across organizations of all sectors and sizes. At the same time, the financial services industry faces new unique threats from fraud perpetrators and continued expectations from regulators that Anti-Money Laundering (AML) Investigations and Compliance services must be maintained despite the disruption to business-as-usual.

Praetor Forensic Auditing provides the services required to help private and public organizations identity the nature and extent of financial crime and deliver appropriate remedies: Fraud Risk Assessment, Fraud Risk Management, Fraud Investigations, Compliance Assistance, Integrity Due Diligence, Forensic Business Intelligence, Litigation, Negotiation, Reputation Management, Forensic Technology and Discovery Services and Legal Department Operations.

§2. PRAETOR FORENSIC AUDITING’s Strategic Analysis, Advisory Services and Operational Support

§2.1. Fraud Risk Assessment

Anti-Fraud provides an independent and objective assessment of the organizations existing anti-fraud program, gaps in the existing controls and suggest measures to mitigate the gaps.

Praetor Forensic Auditing assists its clients in setting up a monitoring framework, developing relevant checking procedures and identifying key risk indicators of fraud. It also develops training programs for employees, and helps to create a continuously evolving control environment reflective of the risk landscape.

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§2.2. Fraud Risk Management

To deter the occurrence of fraud, Praetor Forensic Auditing provides clients with expertise to set-up and implement a visible and transparent fraud risk management program that allows to create an anti-fraud environment.

Praetor Forensic Auditing assists private and public organizations with turning critical and complex issues into opportunities for resilience and long-term advantage. This involves identification of modus operandi as to how did the financial crime occur, who was involved, what were the extent of losses, and how can it be prevented from recurring.

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§2.2.1.       Our Anti-Fraud Strategy

The Praetor Forensic Auditing’s anti-fraud strategy has four (4) main components: a) Prevention, b) Detection, c) Response, and d) Deterrence. The various elements of an effective anti-fraud strategy are closely interlinked and each plays a significant role in combating fraud. The combination of effective fraud prevention, detection and response measures will create an effective fraud deterrent.

§2.2.2.       Fraud Prevention

The attitudes within your organization lay the foundation for a high or low fraud risk environment. Where minor unethical practices may be overlooked, larger frauds may also be treated in a similar lenient fashion. In such an environment there may be a risk of total collapse of your organization either through a single catastrophic fraud or through the combined weight of many smaller frauds.

A sound ethical culture and sound internal control systems are essential key components of a fraud prevention strategy.

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§2.2.3.       Fraud Detection

There are a range of financial crime indicators – both warning signs and fraud alerts – which can provide early warning that something is not quite right and increase the likelihood that the fraudster will be discovered.

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§2.2.4.       Fraud Response

Any organization should set out its approach to dealing with fraud in its fraud policy and fraud response plan. Organizations should ensure that this includes provision for learning lessons from fraud incidents and appropriate, prompt follow-up action.

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§2.3. Fraud Investigation

Fraud Investigation helps organizations manage the risk an vulnerabilities that come from global corruption, from high profile and complex financial matters to employee, cash, cybercrime and fraud. 

Praetor Forensic Auditing assists its clients with investigation of alleged fraud or corruption perpetrated against corporate and government entities, including, but not limited to, vendor fraud, payables fraud and embezzlement. It also assists with factual, often privileged, investigation of alleged corporate wrongdoing, including, but not limited to, investigation of alleged financial statement misrepresentations and violations of anti-corruption regulations. Praetor Forensic Auditing’s investigation work includes forensic imaging of computers, data analysis, collection and analysis of data, interviews of individuals and review of documents.

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§2.4. Anti-Corruption

Praetor Forensic Auditing helps its clients understand and respond to anti-bribery and corruption compliance in all its phases, even when the businesses span many jurisdictions and are governed by many regulators. It assists in determining loose controls posing risk of violation of FCPA and Bribery Act, showcasing company’s views on corruption and bribery to regulatory bodies and also provide training to employees regarding FCPA, Bribery Act and related provisions.

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§2.5. Compliance Assistance

Corporate executives and board of directors have increasing demand on evidences of whether their corporate compliance infrastructures, processes and controls are effective, integrated, efficiently risk-aligned and embedded throughout a complex, global organization. Effective and cost-efficient management of legal, regulatory and reputational obligations is a critical element of corporate governance and enterprise risk management.

Praetor Forensic Auditing assists its clients in assessing, improving and monitoring their compliance programs. Praetor Forensic Auditing’s work includes compliance risk assessment, compliance program gap assessment and improvement recommendations, design implementation assistance for compliance process, deployment of governance, risk and compliance, technology, and data analytics and compliance monitoring.

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§2.6. Integrity Due Diligence

Integrity Due Diligence (“IDD”) is the gathering of independent information to gain an understanding of the integrity and corruption risks associated with a third party. It provides companies with a means to both identify these risks and confirm (or otherwise) information provided to them by a third party.

Praetor Forensic Auditing conducts integrity due diligence services for clients across multiple sectors to help mitigate risks from new commercial relationships and to inform their strategic decision-making.

Companies with an international presence (or plans to expand internationally) are placing an increased emphasis on the need to understand the integrity risks posed by the third parties with whom they contract in those countries (including their representatives, agents, distributors and critical members of their supply chain), in particular for compliance purposes in light of new extra-mural anti-corruption legislation introduced in many western jurisdictions.

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§2.7. Forensic Business Intelligence

Forensic Business Intelligence assists in conducting research and collecting information about a target or an entity through searches on public domain information sources on-site visits and interviews. 

Praetor Forensic Auditing provides Forensic Business Intelligence Services to eliminate opportunities for fraud. We advise clients when the need further information about a potential business partner, another party in a hostile takeover, a competitor or a commercial opportunity. Entering into any significant commercial transaction involves risk, but by providing relevant an reliable intelligence we help clients make better decisions.

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§2.8. Litigation Support

Litigation support is all activities, usually within the law firm, that is designed to prepare a lawyer to try a case, including document review, interviewing witnesses, and case preparation. Litigation support activities include the organization of documents, including paper-based document management, but increasingly through technology such as litigation support software and systems. Documents are organized into searchable databases for review and production.

Praetor Forensic Auditing provides litigation support to its clients, often working alongside their external legal teams, to design and implement investigation strategies and obtain admissible evidence. It also work directly with law firms to enhance their resources and enable them to provide more cost-effective solutions to their clients. As well as legal remedies, Praetor Forensic Auditing has a detailed understanding of extra-legal strategies that can achieve the best outcomes for clients, having worked closely with law firms, media consultants and business advisors in many past cases.

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§2.9. Strategy Consulting

Praetor Forensic Auditing works with leadership to build effective compliance solution strategies to see what is around the corner, and to help leaders understand their risks and responsibilities. It doesn’t simply provide strategic advice. It provides the good counsel and program agility needed to meet current and future regulatory obligations. Most importantly, Praetor Forensic Auditing works with executive leadership to formulate sound strategies that can be efficiently operationalized to achieve results.

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§2.10. Risk Advisory

Praetor Forensic Auditing keeps pace with regulatory change, maintain an ongoing dialogue with regulators, and employ best-in-class solutions to create effective compliance programs for its clients. Praetor Forensic Auditing’s comprehensive approach delves deeply into the regulations and its clients’ business processes to identify and quantify each organization’s individual risks, as well as find, prioritize, and help close any gaps.

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§2.11. Independent Review

Enforcement actions and penalties continue to expose systemic failures and areas of noncompliance within a financial institution’s Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) program and Office of Foreign Assets Control (OFAC) program. Additionally, internal audits or investigations may illuminate areas of potential weakness or concern.

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§2.12. Technology Innovation

Praetor Forensic Auditing provides holistic services related to customer due diligence, sanctions screening, and transaction monitoring technology solutions at a variety of financial institutions- from global, industry-leading banks- to small, regionally focused institutions.

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§2.13. Forensic Technology and Discovery Services

Praetor Forensic Auditing leverages proven methodologies, as well as innovative and proprietary technologies, to identify relevant investigative and dispute resolution evidence in a timely and credible manner.

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§2.14. Legal Department Operations

New technologies and processes are transforming in-house legal departments, but staffing models, too, are shifting to create new efficiencies and respond to the need for updated departmental skills and expertise.

Meet the legal department operations (LDO) professionals – a new position in corporate legal departments that is increasingly helping free up attorney time to focus on legal matters instead of operational ones. The recognition that operations, innovation, technology, and procurement should actually be the responsibility of an identifiable individual, rather than part of the portfolio of the general counsel is the biggest emerging trend in legal operations.

The legal department operations (LDO) professional is typically occupied with project management, financial planning, and managing outside counsel. But these legal department operations (LDO) professionals are also responsible for strategy, goal setting, and managing budgets, people, and vendors. Additionally, legal department operations (LDO) professionals play a crucial role in change management, which might explain their recent popularity.

The legal department operations (LDO) professional is often the person to decide what technology changes make sense and to determine how those technologies should be implemented with consideration of financial and operational implications such as budgeting, staffing requirements, outsourcing, and training.

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§3.    Taking action to manage financial crime risks during COVID-19 Pandemic

§3.1. Maintain culture of compliance with virtual teams

§3.1.1. Ask your organization

  • Does my organization have the technological capabilities to handle a large number of employees now working remotely?
  • Are my teams able to conduct their compliance responsibilities (KYC, TM/Sanctions alert review, Investigations) effectively to ensure compliance with regulatory requirements?
  • If company devices are being used from home, are cybersecurity and sensitive information risks being adequately addressed?

§3.1.2. Potential response strategies

  • Consider the impact on compliance, productivity and cybersecurity of using various technology solutions available.
  • Leverage technological solutions to provide virtual training on new fraud and Anti-Money Laundering (AML) typologies, as well as on revised digital processes from the manual, paper-based processes which are no longer feasible.

§3.2. Added workload with short term loan applications

§3.2.1. Ask your organization

  • Does my organization have processes in place to screen short-term loan applications?
  • Does my organization have the capacity to process the volume?
  • Does my organization have the capacity to onboard clients virtually?

§3.2.2. Potential response strategies

  • Consider your resource requirements for the short-term loan application process.
  • Create, document and deploy new technologybased processes for handling these applications.
  • Assess your methods of onboarding to ensure they meet regulatory requirements.

§3.3. New COVID-19 fraud typologies

§3.3.1. Ask your organization

  • Are my employees and customers aware of the new fraud typologies such as COVID-19 themed phishing attempts that can result in theft of personal data to enable account takeover, credit / loan fraud, card not present fraud, payment diversion fraud, among many other deception schemes?

§3.3.2. Potential response strategies

  • Provide ongoing and up-to-date training to ensure awareness among employees of the new fraud typologies and actions to be taken in order to prevent and detect them.
  • Review and/or employ your cyber incident response strategies and if necessary, consider the information security and data privacy impacts.
  • Ensure your fraud and Anti-Money Laundering (AML) teams are wellconnected to ensure timely reporting of suspicious activity to the Dutch Financial Intelligence Unit.

§3.4. Transaction monitoring of changing consumer behaviour

§3.4.1. Ask your organization

  • How is my customer’s behaviour changing given the pandemic? For example, is your organization faced with an increased number of cash withdrawals?
  • Do my Transaction Monitoring (TM) rules account for deviations from the historical customer profile and could the change in consumer behaviour result in increased monitoring alerts? For example, is your organization faced with increased usage of digital channels by customers to undertake their financial affairs?
  • How should Transaction Monitoring (TM) alerts be prioritized based on the disruption to business-as-usual given the regulatory focus on STRs?

§3.4.2. Potential response strategies

  • Leverage data analytic insights to understand the new consumer behaviour and segment high risk profiles for closer monitoring.
  • Re-assess Transaction Monitoring (TM) models to appropriately capture the new risks posed by new COVID-19 related fraud typologies.
  • Consider your resource requirements for the potential of an unexpected surge in monitoring needs.

This publication contains general information. The Serious Fraud Investigation Office (Van Leeuwen Law Firm | Praetor Forensic Auditing) is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The Serious Fraud Investigation Office (Van Leeuwen Law Firm | Praetor Forensic Auditing) shall not be responsible for any loss sustained by any person who relies on this publication.
Copyright © 2020 The Serious Fraud Investigation Office (Van Leeuwen Law Firm | Praetor Forensic Auditing), All rights reserved.

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