Business Panel - Financial Crime
What is the impact of financial crime on the financial markets?
If you work in the finance industry you will have no doubt previously completed annual compliance training to enable you to be aware of, and help counter, financial crime.
Even if you don’t work in the finance industry, I would hazard a guess that you have seen or heard related terms such as money laundering and terrorist financing in the news. Financial crime is a huge risk to the industry and has a poisonous and corrosive effect on the global economies, governments and our social well-being. It is reputed to be a trillion dollar industry and according to the Annual Fraud Indicator 2017, the annual cost of fraud in the UK is £190 billion.
The impact of any association of financial crime on a company can include reputational damage, significant financial penalties, sanctions and even possible prison terms.
As a result, entities are focusing more and more resources (both in terms of personnel and finances) to ensure the detection and prevention of financial crime is at the forefront of all of their employees’ minds. The ongoing price of being compliant with the ever enhanced regulations and legislations is estimated to cost the financial sector over £5 billion per year.
Financial crime creates disruption and the exploitation of insider information dishonestly generates wealth for those engaged in the illegal activity.
The performance of the financial markets depends greatly on the assumption that ethical, legal and professional standards are upheld and abuse of this may discourage investors, consequently weakening the financial system. There is a close connection between financial market integrity and financial stability, thus negative conduct ever increases the unpredictability of exchange rates and capital flows.
It’s easy to see how financial crime may weaken the confidence in the financial markets, however with the exchange of data and information sharing across borders and liaising with the relevant regulated bodies, alongside routinely monitoring trading activity and being consistent in the handling and timely in the means of disclosing price sensitive information, this should all help ensure honest values are supported.