MAGAZINE - Realview

COMPLIANCE
Sanction
demands sour
corporates
Concern is mounting as global sanctions
compliance saps ever-increasing
amounts of money, time and human
resources from multinationals.
Increasing global regulatory rigour has forced multinational
organisations to focus on co-ordinating their economic
and trade sanctions compliance activities across
borders. This is a key finding in Facing the Sanctions
Challenge in Financial Services, a new Deloitte survey of
388 executives and managers from around the world.
However, just one in four companies gives compliance
staff training once every two years – at the most.
The complexity of screening all the dimensions of financial
transactions (56 per cent) and meeting growing regulator
expectations (41 per cent) are some of the biggest
challenges respondents’ companies face in implementing sanctions-related
controls. Only half the companies have turned
their sanctions policies into a process.
“This creates the real possibility of regulatory discipline
by the authorities,” says Deloitte Asia Pacific Sanctions
Advisory Practice lead partner Graham Dillon. “The absence
of a robust sanctions compliance program, or an inadequate
one, poses a real risk of prosecution from either Australian
or international authorities, in particular the US
Office of Foreign Assets Controls (OFAC).
“As the authorities continue to be more rigorous in their
oversight of financial institutions and international regulators
increase their own vigilance, more organisations are
responding to regulatory actions now than in the past 10
years. At the same time, financial institutions have to contend
with shrinking compliance budgets and headcounts. This is
a combination fraught with danger.”
The study, in which 32 per cent of respondents were
based in the Asia-Pacific region, also revealed some leading
practices in sanctions compliance.
Risk assessments
Companies are increasingly using risk-based approaches to
sanctions compliance, especially since OFAC’s 2006 Interim
Economic Sanctions Enforcement Procedures and the EU
Third Money Laundering Directive required that compliance
programs be tailored to a bank’s risk profile.
Sanctions programs including risk assessments – an essential
first step to a risk-based approach – have become part of
industry-leading practices. Meanwhile, of the 44 per cent of
respondents who reported their companies had a well-defined,
sanctions-specific compliance program in place, 70 per cent
30 RISK August 2009
“The absence
of a robust
sanctions
compliance
program, or an
inadequate one,
poses a real risk
of prosecution
from either
Australian or
international
authorities”
were either completing or had completed a formal sanctions
risk assessment within the past two years.
Leveraging IT
Financial services companies are at the forefront of industries
endeavouring to use IT solutions to meet their expanding
compliance obligations, with most companies having
deployed IT solutions at the initial detection stage and then
manually investigating the alerts generated by those systems.
Just 19 per cent of respondents work for firms that have
fully automated this process, but more than twice as many
(52 per cent) expect to do so in three years’ time. Because
automation is expected to increase, the number of companies
with largely manual processes (especially at the front
end) is expected to drop from 37 per cent to less than half
that (17 per cent) in the next three years.
Global approach
Elements of sanctions compliance, from setting strategy
to overseeing lists, can be run at global, regional or local
levels, however a global approach seems most popular.
Indeed, 55 per cent of respondents’ companies set sanctions
compliance policy at the global level and 40 per cent
develop and oversee sanctions compliance and procedures
at a global level.
More than one-third of financial executives indicated
that their companies’ board and C-suite executives communicate
on sanctions compliance across all geographic
regions, co-ordinating efforts globally.
“Despite a slowly shrinking global economy in recent
months, the speed with which money is changing hands
throughout the financial services industry and beyond has
remained unchanged,” notes Deloitte Forensic and Dispute
global leader Tim Phillipps. “Finding a needle the size of a
few million laundered dollars in a billion-dollar haystack of
legitimate transactions can be a challenge for any multinational
organisation, but it should remain a global priority
for management.” R