The role of corporate culture in the fight against financial crime?
Fraud. Money laundering. Bribery. Asset misappropriation. Does your business have financial crime under control? With forty-eight percent (48%) of financial services organisations reporting having been affected by financial crime1 the financial services industry is the most threatened by this type of criminal activity and as a result needs to have, and does have, the best and most robust prevention and detection tools and processes in place. However, criminals evolve quickly and so must the fraud and risk management strategies that protect businesses and their customers.
Do you know what you’re up against?
Ten percent of economic crime is discovered by accident1 which suggests organisations may not have fraud prevention and risk management completely under control.
The first step to preventing fraud is to identify the scope of the problem, and while most business leaders admit fraud does exist within their organisation, there is a knowledge gap when it comes to producing actual fraud figures.
You’d be surprised at the percentage of individuals who report having provided incorrect information when creating an online account. See the figures on GBG’s Risk Management Infographic.
Businesses and government organisations are prioritising the implementation of processes and solutions to address fraud across the board to create an accurate benchmark for fraud prevention whether it originates from an external or internal perpetrator.
While it may be common knowledge amongst industry experts that the majority of fraudsters operate inside the organisation they’re defrauding, these criminals continue to get away with their illegal activity. This is likely because when a criminal operates from within, they’re fully aware of what tools and processes are in place to detect suspicious or fraudulent activity and how to avoid those mechanisms. Fortunately, internal fraud has decreased over the past two years as a result of improvements to corporate culture.
Corporate culture impacts financial crime.
Organisational culture is a primary driver in employee behaviour, and research shows that companies with an ethical, cultural climate are less likely to have employees engaging in unethical behaviour. The majority of modern organisations have clearly defined values that underpin their company culture that can be found on their website, in their offices, and are likely regularly communicated to their staff. While employees may take some cues from these words culture can only be created through the attitudes and the actions of the people who make up the organisation, especially the leaders.
Leaders need their teams on side because it is likely the individuals who are in the thick of things – the administrators, the managers, the analysts, the specialists – who are likely to see or hear something suspicious. This group make up the whistleblowers. Whistleblowers are good for good business; however, the label is still controversial. Organisations are faced with a challenge as they become more reliant on team members who often put their reputation – and in some cases their livelihood and safety – on the line in order to report wrongdoing. Encouraging staff to come forward to report wrongdoing or suspicious behaviour and protecting them from or compensating them for any consequential reprisals are connected issues that must be addressed in conjunction in order to foster a true shift in attitude towards whistleblowing.
The world of financial services will continue to change to combat the evolution of financial crime. Regardless of the changes placing the right people and the right teams on the front lines and behind the scenes will be an essential component in the fight against financial crime.
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This article was written by the team at GBG.
Business Development Manager, APAC
1 Source: PwC Economic Crime Survey 2016.