The COVID-19 pandemic has triggered unprecedented change, forcing major lifestyle adjustments and turbulence in the financial markets.
Financial crime across the globe is expected to rise in response to the uncertainty1 resulting from the ever-changing landscape. Organisations must work together to mitigate financial criminal activity and adapt processes and controls, not only to meet regulatory requirements but also to support customers, while protecting the financial system and minimising negative impacts on society.
This has also been highlighted in the 2020/21 FCA Business Plan. It’s immediate focus has been on: protecting the most vulnerable in society, highlighting the increased risk of scammers looking to exploit the situation and remaining vigilant to potential misconduct in the financial markets.
Organised crime will diversify, and organisations across all sectors will need to adapt to manage new risks
The simultaneous supply and demand shocks to the global economy, and widespread closure of borders across the world, are dramatically impacting the ability of organised crime groups to continue normal operations. According to the think tank Royal United Service Institute (RUSI), organised crime groups will not stop; instead, they will diversify rapidly to negate the restrictions imposed by COVID-19. The financial services industry therefore has a responsibility, more so now than ever, to ensure that financial crime compliance remains a focus and adverse impacts to society can be limited at an already challenging time.
Despite the challenges, financial services will play a crucial role
In the current climate, financial services has a critical role in providing financial stability, enabling relief from humanitarian organisations to the worst-affected countries and facilitating various stimulus packages issued by governments to help economies cope with the pandemic. As a result, financial crime compliance will play an important role. For example, humanitarian-aid organisations should not be hindered by sanctions restrictions. Although licenses for humanitarian aid have always been part of the global sanctions’ environment, and given the clear benefit of facilitating the flow of humanitarian aid during the COVID-19 epidemic, further clarity in the form of more specific licenses for the current circumstances would give banks greater confidence in deciding which transactions are permissible.
Organisations should consider when and what compliance activities can be undertaken. While focus on sustaining business activity is important, steps can be taken to reduce exposure to potential financial crime risk. EY has a number of relevant offerings to ease the burden of the increasing challenges and can help facilitate the crucial role that financial services will play in protecting our financial system and overcoming this global pandemic.
Challenges that are likely to be faced