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Financial Crime Prevention Best Practices in Malta: A Must for Businesses
As financial crime continues to evolve, it is crucial for businesses in Malta to stay ahead of the game and implement effective strategies to prevent such crimes. Financial crime encompasses a range of illicit activities, including money laundering, tax evasion, bribery and corruption, and financial market abuse.
Main Pillars of Sound Financial Crime Compliance
Instilling a Culture of Compliance
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 in instilling a culture of compliance.
Enterprise Risk Assessments
Each organisation is exposed to different risks based on its business model, services, products, 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
Customer, counterparty, and asset risk assessments have become crucial in managing sanctions-related risks. It is essential to establish risk-based procedures to assess customers, counterparties, and 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. Continuous training should address the risks to which the organisation is exposed and include legislative and regulatory changes, as well as 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. A risk-based compliance monitoring plan is the cornerstone of an effective compliance function.
Independent Testing of Financial Crime Compliance Program
Internal audits should be carried out by a sufficiently qualified internal auditor to ensure that the financial crime compliance program is implemented in line with organisational policies and follows relevant regulatory requirements.
Conclusion
Financial crime compliance is not just a concern for regulated entities, but organisations in general. With the ever-evolving technological landscape and innovative business models being adopted, managing financial crime has become a critical challenge. A dedicated management team, robust internal risk assessments, systems, policies, and procedures, and knowledgeable and competent employees are key components to navigate safely through this changing landscape.
This article forms part of a series focusing on cross-sectoral matters relating to governance, risk, and compliance in Malta, offering legal and practical insights for understanding and navigating the dynamic landscape of GRC.