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Finance

WHAT BREXIT WILL MEAN FOR EUROPEAN REGULATION AND THE UK’S FIGHT AGAINST MONEY LAUNDERING

Imam Hoque, COO & Global Head of Product, Quantexa

 

Money laundering, the act of concealing the origins of illegally obtained money, is a real threat to the general public as well as businesses across the globe. Often, there can be a real lack of understanding when it comes to the act of money laundering and when such an incidence would occur. The reality is though, for organised criminals to operate successfully, money laundering must take place. “Dirty money”, from the profits of people trafficking and drug dealing, must be cleaned before it can be used, while finance is needed to support terrorist activity. With the deadline for article 50 being triggered on the horizon and, at present, a no-deal Brexit looking increasingly likely, it’s absolutely crucial the UK Government steps up its efforts to ensure financial safety.

 

 

The past year we’ve witnessed a real change in attitudes towards anti-money laundering (AML) regulation within the EU. Previously, legislation on a global scale has been fairly inconsistent. With more high-profile instances cropping up than ever before, the EU has begun to take a much more serious approach to financially motivated criminal activity. The EU’s latest initiative, the 5th Money Laundering Directive, is the first of its kind to take into consideration digital currencies and prepaid cards – something in which the US market can learn from. The focus of the directive is to establish a centralised and public register of companies and their ultimate beneficial owners, halting the creation of shell companies which can be exploited to transform the profits of criminal activity into legitimate assets. Even though the federal government has required banks, brokerages and even casinos to take steps to stop customers from using them to clean “dirty money”, they have largely overlooked newer financial technology until now, reflecting Europe’s forward-thinking approach to combatting white-collar crime.

 

 

Yet, it’s important to note that instances of money laundering generally occur in weakened environments. Criminals seek out areas where there is a low detection risk and where potential loopholes and uncertainty exists. The impending Brexit, and all its associated chaos, provides a ripe opportunity for organised criminals to capitalise on our instability. At present, our Brexit deal does not protect financial services, and it is a real possibility that the EU will exclude the UK from further AML initiatives in the foreseeable future. If the UK wants to remain not only competitive but also economically and financially secure, we need to step up our efforts. Not only will we need to stay in line with EU regulation in order to build a strong relationship, we are going to need to place a lot more emphasis on the importance of AML efforts and ultimately transform in order to remain a key player.

 

 

According to the National Crime Agency, billions of dollars of “dirty money” is moved through or into Britain each year. The presence of a highly developed professional services industry increases the attractiveness and also the vulnerability of the UK’s financial system to exploitation by those engaged in money laundering. The NCA states that the ease with which suspect foreign money can enter the economy has become an essential aspect of London’s success. According to Transparency International, a shocking £4.4 billion worth of property has been bought with suspicious money in the UK. To ensure corruption does not worsen, particularly with Brexit on the horizon, new legislation is going to be necessary. The National Crime Agency’s roll out of Unexplained Wealth Order ruling is just one example of how we can make a valued impact through regulation. Such legislation reverses the burden of proof, forcing those suspected of gaining assets illegally to prove they were obtained within the confines of the law. Such regulation is going to be absolutely crucial in enforcing change.

 

 

It’s evident that British businesses are at a greater risk of being drawn into corrupt practises with Brexit on the horizon. The National Crime Agency has stated there is a possibility we will face a Brexit-driven surge in crime once we leave the EU, with loopholes and instability rife. However, to ensure the economic and financial security of our country, we not only need to retain close ties to the EU, but we also need to up our efforts in innovation, policy and regulation.

 

 

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Finance

HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES

While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash flow and costs to drive success in uncertain times, says Matthew Thorpe, partner at Haines Watts Essex.

 

Managing people and expenses

There are certain costs that you just can’t avoid as a business – to keep your operation running seamlessly, but scrutinise the detail and cut down on any non-essential expenses. Check things like your SaaS subscriptions and look out for costs that auto-renew and if you do cancel, remember to also cancel your direct debits too.

You might want to put a freeze on hiring new people, but ensure that other roles and responsibilities are clearly and efficiently assigned across your team. The Coronavirus Job Retention Scheme (CJRS) has been introduced by the Government to help UK employers access support to continue paying part of their employees’ salary to avoid redundancies. Affected employees are classed as “furloughed workers”.

Once furloughed, the employee cannot work or they will not qualify for the scheme. For businesses that perhaps need to go further, there may be some roles they don’t need any more, but businesses should work sensitively with people to manage this.

 

Cash is king

In uncertain times, owner managers will need to keep operations going to ensure financial stability. You should look to manage debt more efficiently by negotiating extended payment terms with creditors. You could also renegotiate loans for longer repayment terms to give yourself a lower monthly payment, helping the business to set some cash aside each month.

 

Daily forecasting

As a business owner, you need to create a cash flow projection and update this regularly if you are to improve things. You can do this using financial information to create a picture of how the business will look in the next 12 months. The forecast needs to show revenue sources and expenses, which will show the ups and downs of business income and can be used to make sure that enough finance is in place.

 

Good house-keeping

While banks and other finance providers recognise that the cashflow of a business may be disrupted by the impact of Covid-19, they are still going to want to see that you are viable and continue to trade in these uncertain times. Make sure your business is organised and don’t let disorganisation cause unnecessary issues. You can evidence this by having detailed forecasts; current order books and projections (as best as possible).

Having instantly accessible, accurate financial information allows you to plan effectively, spot issues before they become problems and manage your money in the most efficient and rewarding way.

 

Embrace technology

Software is now incredibly user-friendly and accessible from anywhere. For a business owner embracing the technology, this means:

  • Invoicing can be done instantly when a job is complete, emailed to the customer with an easy to use link to a payment platform.
  • Comparison websites can automatically monitor and help maintain lowest cost for things such as light & heat, insurance etc.
  • Technology can be used in place of face-to-face meetings. It can also enable them to adapt production lines to different demands.

All of these things and more, used properly, can make managing your business finances quicker, easier and often cheaper.  You will also be able to bring clarity to where your business stands and prepare for the next steps.

 

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Finance

HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK

FINANCIAL SERVICES

By Alex Saric, smart procurement expert, Ivalua

 

UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.

This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.

 

More suppliers, increasing risk

One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.

The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.

A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.

 

Businesses unprepared for the worst

One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).

In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.

 

Making supplier management smarter

It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.

For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.

To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.

 

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