Common pitfalls & issues:
One of the common issues we see is firms not holistically considering financial crime risks inherent in the business and operating model in the firms' Business Wide Risk Assessment ("BWRA"), potentially exposing the firm to unknown financial crime, operational risk, reputational damage etc. Moreover, we see those working in the First Line of Defence & Financial Crime Compliance roles being unaware of the BWRA or the value-add that the BWRA can bring.
An effective BWRA:
Having an effective BWRA can ensure you are aware of the inherent risks that your firm faces, can underpin the firms' risk appetite as well as highlight any vulnerabilities in the Financial Crime Compliance Framework. Moreover, by doing so the firm will be able to direct resources to address the specific financial crime risks that the firm faces. Proportionality is a key consideration in the creation and implementation of your BWRA.
Why you need one:
Not only is the 'Risk Assessment by relevant persons' a requirement under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 ("MLRs"), which can be requested at any point by the FCA, it forms an integral part of an effective 'Financial Crime prevention toolkit'. Accordingly, a functioning BWRA demonstrates that a firm has taken a considered and documented approach to the financial crime risks, mitigating financial crime risks before they can materialise and allowing for efficient allocation of resources. We continually see the BWRA form part of each Skilled Person review, Dear CEO letters where the FCA highlight deficiencies in the BWRA and through supervisory engagement / feedback from the FCA, so they are evidently a priority on the FCA's supervisory agenda.
Our Regulatory Consulting Team have supported numerous firms with ensuring they have a compliant and proportionate BWRA in place, including drafting, calibration, testing, assurance and the implementation of BWRAs. Our team consists of former regulators, experienced consultants and former practitioners - MLROs and Heads of Compliance / Risk who have been responsible for the implementation of these. We would welcome the opportunity to discuss your BWRA with you and expand on how we can add value to your BWRA process.
