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ENLISTING TECHNOLOGY TO HELP FIGHT FINANCIAL CRIME

By Rachel Woolley, Director of Financial Crime Fenergo

 

Million-dollar properties, private jets and parties on luxury yachts with celebrity friends. Although it might sound like the plot for a new reality series, this is what corruption, illicit funds and political connections can buy at the expense of ordinary citizens.

Following an investigation by the International Consortium of Investigative Journalists (ICIJ)[1], thousands of leaked documents, known as the Luanda Leaks, suggest that the daughter of Angola’s former president, Isabel Dos Santos, acquired her enormous wealth through favourable access to lucrative deals. These activities were often to the detriment of Angola’s poorest citizens.

We’ve also started to see the application of unexplained wealth orders (UWO) in the UK, with the first UWO issued in 2018. The latest UWOs relate to the grandson of Kazakhstan’s former president, Nurali Aliyev[2], is currently being investigated by Britain’s National Crime Agency (NCA) to explain where he got the money to buy a £80 million house in one of London’s most expensive neighbourhoods. It is thought that the funds used to buy the property have criminal origins.

But these aren’t isolated stories. There have been countless examples in recent years of how corruption, fraud and political connections has resulted in billions of dollars being stolen worldwide in countries such as Brazil, Malaysia, Gabon, Russia and many more.

A recent report by Fenergo found that regulators have issued over $36 billion in AML/KYC and sanctions-related fines (and rising) since the financial crisis. This staggering number shows that related financial institutions had inadequate policy, processes, procedures and systems, in addition to poor governance and oversight in many cases.  Interestingly, a similar report found that the vast majority of these regulatory costs were associated with an AML/KYC-specific labour force.

Not surprisingly, the methods used to hide the illicit wealth are pretty similar; invoice fraud, suspicious transfers, offshore companies and complex ownership structures to disguise beneficial ownership of assets and property. Another commonality is the detrimental impact this has on some of the poorest citizens in these countries and the global economy.

But what can we learn from these scandals? And perhaps more importantly, what can be done?

For financial institutions, the importance of leveraging technology to unwrap complex hierarchies, related parties and identifying individuals with political connections cannot be understated. Understanding the ownership and control structure when onboarding entities is critical, along with robust screening practices to enable sufficient oversight of the relationship, accounts and transaction activity. Enhanced due diligence measures must be applied to politically exposed persons (PEPs), their immediate family members and known close associates. Relationship patterns are also significant, as the same service providers are often used, as was the case with Mossack Fonseca in the Panama Papers scandal.

It’s critical that financial institutions are vigilant in the detection and prevention of financial crime before it’s too late.  By automating KYC/AML compliance and leveraging rules-based technology, financial institutions can ensure that internal policies are fully in-line with constantly changing regulations across multiple jurisdictions.  However, human input will still be necessary when red flags are identified by the system.

 

Biography:

Rachel Woolley, Global AML Manager at Fenergo, has over 10 years’ experience in the Financial Services industry having worked primarily in the funds industry and retail banking. She has a strong background in regulatory compliance, particularly in the areas of anti-money laundering and counter terrorist financing (AML/CTF).

Rachel holds a BSc (Hons) Degree in Applied Accounting from the Oxford Brookes University and is an ACCA Affiliate. She currently holds three professional designations; Licentiate of the Association of Compliance: Officers in Ireland (LCOI), Certified Financial Crime Prevention Practitioner (CFCPP) and Certified Data Protection Officer (CDPO).

[1]https://www.bbc.co.uk/news/world-africa-51218501

[2] https://www.theguardian.com/uk-news/2020/mar/10/uk-issues-unexplained-wealth-order-over-kazakhstan-familys-house

 

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Finance

OPTIMISING YOUR FINANCE THROUGH TECHNOLOGY

Covid-19 restrictions and ongoing uncertainty have prompted a fundamental switch in mindset across a multitude of different sectors. Many organisations have begun to recognise that outsourcing their finance can make them more agile and give them the competitive edge they need to compete and scale effectively in today’s market.

Mark Pullen, CEO at Xledger  explains to what extent outsourcing can boost resilience for a lockdown recovery.

 

Solving the pain points

Inefficient processes are prone to causing delays and errors which can have a huge impact on the bottom line when viewed at scale. They can also negatively impact the client experience, causing frustration with missed deadlines and mounting uncompleted tasks.

New finance technology is automating many of the daily, monotonous back office functions such as bank reconciliation and invoice entry, meaning that the nature of the work that a finance professional provides will change. This presents a huge opportunity as it gives these employees the opportunity to be involved in higher-level work. Technology can also provide a resource that gives real time insight, allowing for better strategic decision making, which is so key in the current climate.

 

Optimising your finance function

Outsourcing high-value services within the finance function can improve workflow by implementing a defined and transparent process which streamlines operations. For a finance department, this can speed up areas that require internal controls such as expense reporting and cash release, but it can also speed up the full lifecycle of a project; from time tracking and resource to accounting and billing.

There is also a cost efficiency benefit when outsourcing, as management bandwidth is effectively increased by eliminating the need to be involved in many of the day to day processes. Instead this time can be focused on other business priorities and planning for future growth.

Outsourcing accounting functions to bespoke and standardised technologies means using data led processes that can be measured, optimised and benchmarked against in-house requirements. These processes can also be undertaken remotely, boosting the resilience of your business in these uncertain times.

 

Case study box-out: RPC Tyche

RPC Tyche is a global insurance software supplier with offices in London, Paris, and the USA. Initially a division of award-winning law firm RPC, but now a stand-alone entity, RPC Tyche’s main software offerings support capital modelling, and pricing commercial insurance and reinsurance.

 

The challenge

As part of a restructuring process following the de-coupling with the law firm RPC, RPC Tyche had to separate its back-office processes. They remained under the umbrella of the law firm while the changes were taking place, so initially had some flexibility with the shared finance system, but time was running out to separate the two entities cleanly. As a stand-alone company, RPC Tyche now needed its own financial system; one that could align with its new business processes and that could be implemented quickly to deliver the organisation’s business objectives. Furthermore, they needed a new finance solution that could help them grow exponentially, facilitate a globally diverse group structure, and still maintain efficiency when operating as a small team.

Gavin Dilley, Chief Finance Officer for RPC Tyche commented, “Following an initial discussion with a third-party advisor regarding Xero and Quickbooks, we were recommended Xledger because we required a swift and scalable solution. After contacting Xledger, their tried and tested implementation methodology ultimately assured us that we would achieve the fast-paced implementation needed for our go-live objective. We also really liked that Xledger was a multi-tenanted, true cloud solution with its scalability setting it apart from the competitors.”

 

Implementation and training

Following conversations with Xledger, RPC Tyche created a project management team to keep everything on track on their side, an arrangement that Gavin emphasised “worked really well.” He said that “as a small project team, the flexibility to undergo substantial configuration during the training sessions with the Xledger consultants brought focus and enabled us to dedicate sufficient time to the system without distractions.”

Although the implementation was expected to take three months, RPC Tyche experienced hold-ups owing to the separating of back-office processes, so they were pleased when it was mutually agreed to facilitate a one-month delay.

 

Post-implementation results

“The implementation process was highly effective, and we’re very happy with the results,” said Gavin. “Since implementing the Xledger solution, we’ve been so pleased we haven’t had to dip back into the old system as the transfer of historic data has been particularly successful.” RPC Tyche had a large volume of historic data and transactions, including timesheets and work in progress reports that were all successfully migrated to Xledger during implementation. “We’re particularly happy with how easy it has been to onboard our new Finance Controller, due to flexible training and the system being so intuitive.”

Gavin added, “Since implementing Xledger, we have far greater reporting flexibility, better distribution of skills within the finance team and are naturally more self-sufficient because we can make amendments to the system without relying on the software provider.

The system is easy to use, and the purchase order functionalities, integrated workflows and automation of processes have enabled us to be highly efficient, even as a small finance team. Not to mention that the Xledger support team are incredibly responsive, so we can continually maintain productivity.”

 

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Finance

THE FUTURE OF FINANCE LIES IN THE CLOUD

Author: Chris Tredwell, Enterprise Business Development Manager,Aqilla

 

At the beginning of 2020, 87% of public sector organisations surveyed by UKCloud expressed a desire to move traditional IT environments into the cloud. But, as a result of the Covid-19 pandemic, the rate of cloud adoption in the UK has grown significantly, as many companies not already in the cloud were compelled to make the switch due to enforced remote work.

This is certainly indicative of many other industries, finance included. Pre-lockdown, the majority of finance and accounting teams still relied on on-premises software, but the move to remote-working meant many organisations had to quickly reconsider their technology needs and move some or all of their IT requirements to cloud-based platforms.

But, in a recent survey by GrowCFO – an independent portal for finance leaders to network, learn and collaborate – it was found that there is confusion around what actually equates to a true cloud finance platform. This was apparent given some respondents replied with ‘cloud’ to known on-premises solutions, suggesting the difference between cloud-based and ‘on-premises with remote access’ is not fully understood.

This is an important point because it has the potential to influence the technology choices made by organisations across the sector. In short, traditional on-premises financial software resides on IT systems owned by the user organisation, typically on hardware hosted within their building. After purchasing and installing the software, they maintain, secure, and manage it themselves (or with the help of a specialist third party IT support business). Many of these systems also offer the option of connecting remotely, with users accessing software and data via a connection to their office-based network.

Conversely, cloud software is almost entirely outsourced and delivered via a web browser or app as a service to each user, hence the description ‘Software-as-a-Service’ (SaaS). The software resides with the service provider who is also responsible for reliability, performance, the availability of enhancements and updates, as well as the security of their service or application. The location of the user is largely irrelevant – as long as they have a good, secure internet connection, a suitable laptop or tablet and a browser, they can access the service in exactly the same way as if they were in the office.

Chris Tredwell

One of the most immediate changes organisations notice when moving from on-premises technology to the cloud is it removes the need for in-house IT personnel or external specialists to manage and maintain the technology. For many smaller organisations, it liberates the individual who has been given the task of ‘looking after’ the on-premises tech, even though it usually isn’t their specialism or even in their job description.

But that’s just the start. The massive success of the cloud-based, ‘-as-a-Service’ technology industry is predicated on a range of key developments over traditional on-premises, or ‘legacy’ software.

 

A Formula for Finance

Often of particular interest to finance and accounting professionals are pricing and payment terms that accompany today’s cloud SaaS options. Cloud-based software typically offers the convenience of a monthly pay-as-you-go model, instead of investing significant up front sums in one-off software purchases. This also saves money on the server hardware that has previously sat in the office, which may no longer be needed at all. Also included in cloud pricing arrangements should be details which clearly set out the type of service and support included in the cost. Done well, cloud-based customer support and service can deliver an exceptional experience where the provider effectively works as an extension of their in-house team.

The best cloud software providers place huge emphasis on security, focusing on data protection, backup services and their ability to deal with common security issues, such as ransomware. This also extends to compliance, and in the finance context, specialised compliance capabilities offered by many cloud software providers can be of particular benefit. Even for the most niche requirements, there is often a software provider out there whose technology has been written to meet compliance rules, often saving users considerable time and effort.

And then there’s the key issue of functionality and performance. Today’s cloud-based finance software market offers a wide range of options from simple entry-level tools to powerful applications designed to meet the needs of even the biggest and most complex finance departments. For organisations considering cloud, it’s important to assess the options available and choose a provider that most closely matches their individual needs.

For many finance and accounting organisations and their teams, the requirements of lockdown and transition to home working were made possible by cloud-based software solutions. In doing so, they have gained valuable insight into the range of services available, their potential benefits and how technology can become much more than just a labour-saving tool, but also a means to enhance their all round business capabilities.

 

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