How to Prevent Financial Crimes with Internal Controls in Malta
As financial crimes continue to evolve, organisations must be well-equipped to manage risks arising from such trends. In Malta, where the corporate and financial services sectors are thriving, it is crucial for businesses to establish robust internal controls to prevent financial crimes.
The Main Pillars of Sound Financial Crime Compliance
Instilling a Culture of Compliance
Embedding a compliance culture within an organisation is fundamental to developing and implementing an effective financial crime compliance program. The tone from the top is key in ensuring that employees adhere to the highest standards of compliance. Having board members and senior management with the right skillset, character, and ethical standards helps instill a compliance culture.
Enterprise Risk Assessments
Each organisation is exposed to different risks based on its business model, services, and products it offers, interactions with customers or suppliers, and geographical exposures. Through risk assessments, senior management should identify, measure, and monitor the risk exposures of the organisation.
Internal Policies, Procedures, Systems, and Controls
Collectively, internal policies, procedures, systems, and controls are the backbone of a complete financial crime compliance program. These act as a blueprint outlining the way an organisation adheres to its regulatory requirements and mitigates its financial crime risks.
Risk-Based Due Diligence
- Customer risk assessments
- Counterparty risk assessments
- Asset risk assessments have become relevant within the context of sanctions. It is crucial to establish risk-based procedures to assess one’s customer, counterparties, and/or assets relating to investments and apply measures to manage the relevant risks.
Employee Training and Awareness Programme
Well-trained employees with strong analytical skills are key in ensuring that financial crime risk is managed appropriately. Effective training programmes should include: + Legislative and regulatory changes + Emerging trends of financial crimes
Designated Compliance Function
A compliance function ensures that an organisation operates in line with applicable laws and regulations and internal policies and procedures. The adoption of a risk-based compliance monitoring plan is the cornerstone of an effective compliance function.
Independent Testing of the Financial Crime Compliance Program
Independent testing of the FCC program should be carried out by a sufficiently qualified internal auditor, either established internally or externally. Internal audits should be conducted on a risk-sensitive basis, focusing on areas that merit the highest attention.
Conclusion
Financial crime compliance is not limited to regulated entities alone; organisations in general must take proactive steps to prevent financial crimes. In Malta, where the business landscape is constantly evolving, it is crucial for businesses to establish robust internal controls to navigate safely through this ever-changing environment.