Managing financial crime risks is essential for maintaining the integrity of an organization and ensuring long-term sustainability in today’s complex regulatory environment.
An entity organizes its compliance function that allows financial crime compliance risk to be managed effectively on an entity-wide basis, taking into account the geographic diversity, target market, nature of operations, and complexity of business and operations. The larger the entity with a complex structure, the larger the financial crime risk.
The compliance function is also responsible for performing the sanction screening and related activities to ensure that sanctions risks are identified and managed. The sanction compliance officer is dedicated to performing the sanctions compliance-related roles and responsibilities.
The diversified number and different types of customers naturally expose the entity to risks and non-compliance with applicable regulatory requirements, including sanction compliance laws or regulations. The management of sanction risks is of the same importance to both large and small organizations, and they must be consistent with the entities’ overall compliance strategy, risk profile, and structure.
Where the organization has international operations, the sanction compliance officer is deputed, at international locations, to assess and manage sanctions risks.
Managing Financial Crime Risks
To increase efficiency, the sanction compliance officer may collect information from other departments, such as audits regarding financial crime incidences observed in a specific branch or department. The sanction compliance officer, independently or in close coordination with the financial crime risk management team, may conduct independent sanctions risk assessments of critical areas where the likelihood of non-compliance is high.
The sanctions compliance officer serves as a subject matter expert and may advise departments on sanctions-related regulations and issues. These departments may include risk management, account opening of customers, transaction monitoring, product development, international trade, outsourcing, operations, etc.
The sanction compliance team must be independent of business activities to carry out its activities effectively. An organization must ensure that the sanction compliance team is not placed in a position where there are real conflicts in its scope of responsibilities or reporting lines.
The sanction compliance officer and the team should have a clear line of authority and mandate with unrestricted access to the information and personnel to carry out their roles and responsibilities.
The sanction compliance officer establishes a constructive working relationship with the compliance team and business lines to perform the duties, including the identification of sanctions risks and issues.
The sanction compliance officer should have the necessary qualifications, experience, and skill set to understand relevant legal and regulatory requirements and the implications of such requirements on the organization.
The sanction compliance officer must provide the required physical and financial resources. An entity may consider encouraging sanction compliance officers to possess accredited qualifications in the area of compliance, including anti-financial crime.
Final Thoughts
In understanding the intricate landscape of financial crime compliance, it’s evident that an entity’s approach must be both comprehensive and adaptable. The establishment of a dedicated compliance function, particularly a sanctions compliance officer, underscores the gravity of managing risks across diverse geographical locations, operational complexities, and a varied customer base. Regardless of an entity’s size, the consistency in managing sanction risks should align with its overall compliance strategy and risk profile. With international operations, the sanctions compliance officer’s role becomes pivotal in assessing and addressing risks.
The autonomy of this role, reinforced by the officer’s expertise, is crucial to ensure objective decision-making, free from potential conflicts. Collaboration with other departments amplifies the officer’s ability to comprehensively identify and manage risks. To effectively navigate this complex landscape, organizations should not only resource their compliance teams adequately but also advocate for continuous education, ensuring that these officers are abreast with evolving regulations and can effectively safeguard the entity against potential breaches.
