Financial Crime Prevention Assignment 2022

Running Head: FINANCIAL CRIME PREVENTION
FINANCIAL CRIME PREVENTION
Name Of the Student
Name Of the University
Author’s Note

1
FINANCIAL CRIME PREVENTION
(a):
There are various key risks associated with the FCP Manager. Some of them are
discussed below:
 Operational risk is explained as the risk associated with the failed internal processes of
the company including people and systems. Such risk may also result from external
processes. This type of risk includes risk to legal consequences. However excludes the
strategic and reputational risk.
 Risk of internal fraud is another important risk that may arise from the ineffective
compliance of the FCP provisions because, FCP provisions are meant to control the
Financial Crime and its relevants. However, its inefficacy would let the people take the
financial system granted and resulting in financial crimes.
 External fraud broadly categorizes robbery, forgery, cheque kiting and damage from
computer hacking meaning that the external fraud is related to the fraud committed by
people outside the governance of the company and its policies.
INTERNAL RISKS:
People:
The human resources and its management has become an important part of operational risk. This
means that the people who form the framework of the workplace are the risk to the company. In
other words, poor training and over worked employees tend to take wrong ways to prove their
self-image in the company and hence, tend to take the wrong route. Such practices influences the
ability of the person to adhere to the company and its policies. Thus, it is an important factor

2
FINANCIAL CRIME PREVENTION
which means that the people should be provided with adequate exposure and training for them to
pick up himself or herself from an inefficient employee to the always appraised and well
working image.
 Processes and Systems:
In this condition, it has been explained that the poor designing of the websites, or internal
systems of the company would result in the non -compliance of FCP by the workers and
employees.
EXTERNAL RISKS:
Sanctions:
Penalties are form of risks that arise from non-compliance of legislations and statutory
regulations. They are in various forms; fines, limitations on activities, additional barriers
to approval of licenses and other statutory certificates and also prison. An organization
may face any of these forms of punishment. Even if the organization is not compelled to
go through such forms of punishments, the investigation by the government is time taking
as well as cost including because the costs of fees of the lawyers, longer working hours to
meet the defenses for investigation, and other potential legal and contractor fees. To
minimize the penalties and punishments, the organization should follow the framework of
implementation of statutory compliance starting from documentation, follow-up an
tracking of the keystones of the statutory regulation and the organizational framework.

3
FINANCIAL CRIME PREVENTION
Reputational Damage (Bribery and Corruption):
In 1990s, Kathy Lee Gifford was caught amongst the scandal that the apparel chain was
allegedly indulged in production of clothes using child labor. Similar scandals were brought
into light regarding Nike and many other brands. Such scandals arise from small loophole in
the compliance framework of the organization. The companies in these situations eith prove
their innocence by way of immediate production of evidential basis to prove their legal
compliances or if they know that the legal requirements have not been complied by them,
then they tend to sort the matters by way of bribery or corruption. However, either the
reputational damage is already done and the company’s recovery depends upon its flexibility
to adopt compliance regulations. Though many companies improve from the set-back, others
tend to drown with lacking reputation and goodwill. Hence, allegations of statutory non-
compliance and punishments leads to damage of reputation and hence losing sales and
market. Thus, ensuring compliance in the supply chain of the organization is as important as
a challenge to scandal explosion.
Access to Markets and Product Delays:
One of the most devastating risk that a company faces is that the company has access to
market but is short of supply. Shortage of supply means decrease in production and hence,
the availability of the product and services in the market decline tending to push the
customers towards the products and services of competitive firms. Demand, Production and
Supply is the essence of business and any loop in the chain affects market and its customers.
Regulated Out of Business:
Governments are the controlling authorities for the execution of statutes and legislations and
by virtue of their administrative power, they can regulate activities out of business. This can

4
FINANCIAL CRIME PREVENTION
be on the grounds of morality or subsequent complain of use of specific chemical or internal
investigation by the Government authorities. For example, recently in Canada, non-rescue
animals were protected and their sale was banned in the market. Hence, it affected the
business of many puppy-mills in the industry. Other examples are recently, usage of MSG
was found in Indian market for Maggi masala, which affected its sale and uplifted their
competitor’s market and advertisements. This is an example to relate the circumstances
which may be prompted and if the compliances are not followed, then in no time, the product
or service would be out of business. In the given scenario, the Maggi Masala was alleged to
have not complied with the food manufacturing regulations amounting to the charges of non-
compliance. However, the company immediately either changed the product composition as
per the requirement of the compliance or produced enough evidence to prove that the legal
requirements have been complied. Hence, the focus of such scams are only to regulate the
corporate out of business however, it is only the compliance and its related evidence that can
prove it otherwise.
Organization for Economic Cooperation and Development (OECD) is a unique platform
to establish economic growth, prosperity and sustainable development between the market
economies to work with each other including the member as well as the non-member
economies1. The importance of business integrity is the essence for the formation of such
forums. Globalization has led to the significant positive impact upon the market including higher
production, and efficacy with increased average incomes, more competition levels, and a varied
choice of goods and services in the market2. Thus, to maintain the business integrity it is
1 Drakulevski, Ljubomir, and Leonid Nakov. "Strategic approaches to creating and developing the concept of
business integrity." Strategic Management 21.2 (2016): 23-31.

5
FINANCIAL CRIME PREVENTION
important to establish and maintain FCP and Corporate Governance to ensure the compliance of
statutory regulations and rules by the company Governance in the company3:
 Shareholder Recognition and Stakeholder Interests (Sanctions): Corporate
governance ensures that all the shareholders have their opinion and voting rights in
general meetings, depending on the type of shares held by them. This is done because the
shareholders holding little shares are brushed aside for the majority shareholders and
executive board members to vote and decide the matters. Thus, to protect the rights of
small shareholders and ensure that their voting rights are not infringed due to any
circumstances, establishment of corporate governance is important.
Addressing a stakeholder who is not a shareholder of the company would protect the
interest of the community and ensure that all the accrued interests of the stakeholders of the
company without any delay. Thus, establishment of FCP is important to ensure all such
statutory requirements are fulfilled to avoid any legal consequences from the part of the
stakeholders due to non-payment of their dues.
 Board Responsibilities Must be Clearly Outlined (Sanctions): The majority
shareholders form the framework of the decisions of the Board and their responsibilities
should be appropriately and clearly traced along the lines of the rights of stakeholders and
2 OECD 2010, OECD Economic Globalisation Indicators, OECD Publishing, available at
www.oecd.org/sti/ind/measuringglobalisationoecdeconomicglobalisationindicators2010.htm.
3 Sun, Leo, "Why Is Corporate Governance Important?", Businessdictionary.Com(Webpage, 2019)
http://www.businessdictionary.com/article/618/why-is-corporate-governance-important/

6
FINANCIAL CRIME PREVENTION
the employees and workers of the company so that their decision is not contrary to their
rights and interests as well as in favor of the interest of the company. Thus, establishment
of FCP and Corporate Governance is important to ensure the vision of the future of the
company is effectively shares by all the majority shareholders along with the compliance
with the rights and interests of the company stakeholders and the employees and workers
so that no decision of the Board should result in the violation of any statutory regulation
and rights of the company stakeholders, employees and workers resulting in legal
consequences. External fraud broadly categorizes robbery, forgery, cheque kiting and
damage from computer hacking meaning that the external fraud is related to the fraud
committed by people outside the governance of the company and its policies.
 Ethical Behavior (Sanctions and Bribery & Corruption): Code of Conduct and
Professional ethics establish the behavioral and ethical standards for the professionals
including the company Board members, employees, workers and staff to ensure that all
the statutory compliances in relation with the workplace and its environment are met by
the company. Underpayment of taxes, abuse of outsourced employees, sexual harassment
in workplace, discrimination on basis of caste, color, creed, sex, remuneration, unequal
opportunities to men and women, humiliating subordinates, not providing adequate
facilities in the workplace like carpools service for employees during odd working hours,
arrangement of drinking water and so can attract civil and legal problems threatening the
reputation and goodwill of the company. Risk of internal fraud is another important risk
that may arise from the ineffective compliance of the FCP provisions because, FCP
provisions are meant to control the Financial Crime and its relevants. However, its

7
FINANCIAL CRIME PREVENTION
inefficacy would let the people take the financial system granted and resulting in
financial crimes.
 Transparency (Bribery & Corruption, Terrorist Funding): Establishment of
FCP leads to efficient promotion of transparency with respect of the financial records,
revenue reports and other compliances with respect to any action taken within the
parameters of professional conversation. Such transparency leads to effective evidences
in case of any legal consequences brought by any party in any situation. Like, if an
employee accuses an employee for improper remarks, the complaint should be made to
the Human Resource Department in the written form and the action taken by the
company including the fair hearing of both the sides and decision taken, should be all
documented in the written form and to be stored as a record for future references. In
addition, any conversation about allowance or non-allowance of leave, company policies,
confidentiality policy and all should be in the written form and such policies would form
a part of employment contract to ensure the knowledge of the employee before entering
into the contract with the organization. FCP is responsible to ensure all such records are
maintained and statutory compliances are met to avoid any discrepancies due to
unavailability of substantial records. Any activity amounting to the violation of the
provision of compliance, then the same should be clearly reported to the authority. It
forms a basis for establishment of transparency because, clarity can be established only
when the corruption is eradicated and the suspicious activities of terrorist funding are
duly reported to the governing authority.
 Risk Mitigation (Terrorist Funding): When executed constructively, corporate
governance helps in the prevention of scandals, fraud and civil and criminal liability of

8
FINANCIAL CRIME PREVENTION
the company. The laws should be well complied with so that no terrorist funding is
applicable. It also helps in the establishment of trust with the shareholders and the
stakeholders to ensure continuity of investments being made to the company. It also helps
to maintain worthy rapport between the company and its employees and workers by
ensuring a comfortable environment in the workplace free from any discrepancies and
discrimination on all grounds, stress and harassment by other employees in relation to
work pressure, sexual and other colorful remarks, equal opportunities for everyone,
ensuring hygienic and basic facilities to the employees and workers and others.
Therefore, FCP and Corporate Governance ensures that all the company policies and
decisions, ethical and conduct guidelines and employees’ and workers’ behavior or in
compliance with each other along with that of the statutory regulations and provisions of
the existing legislations. It also ensures that the guidelines and other compliances are kept
under scrutiny along with the legislations and statutory amendments to adorn alterations
and changes subjects to the amendments made to the legislations and statutes4. It is an
important part for the assessment of terrorist funding because if any unlawful terms of
financial transactions are suspiciously noticed which can be case of money laundering,
the same should be immediately reported to the governing authority for the effective
steps to be taken. United States passed the United States Patriot Act after the September
11 attacks empowering the government to monitor financial transactions to ensure anti-
money laundering compliances are not breached5. Operational risk is explained as the risk
4 Filatotchev, Igor, Gregory Jackson, and Chizu Nakajima. "Corporate governance and national institutions: A
review and emerging research agenda." Asia Pacific Journal of Management 30.4 (2013): 965-986.
5 "Handbook on Anti-Money Laundering and Combating the Financing of Terrorism for Nonbank Financial
Institutions". 2017-03-01.

9
FINANCIAL CRIME PREVENTION
associated with the failed internal processes of the company including people and
systems. Such risk may also result from external processes. This type of risk includes risk
to legal consequences. However excludes the strategic and reputational risk. But terrorist
funding cannot be calculated as the operational risk because suspicious transactions are
substantially evidential for the establishment of money laundering the terrorist funding
cases and the same has to be informed and reported to the governing authorities to ensure
that the legal compliances and requirements have been met by such companies.
(b):
The agencies responsible for the regulation of corporate governance in the corporations in
United States are the Securities and Exchange Commission at the federal level. It is charged
with the responsibilities and powers for the regulation of the administration and governance
of the companies at par with the legal provisions. The agencies responsible for the regulation
of corporate governance in the corporations in Australia are the Australian Competition and
Consumer Commission (ACCC), the Australian Securities and Investment Commissions
(ASIC) and the Australian Prudential Regulation Authority (APRA) including that of
Australian Transaction Reports and Analysis Centre (AUSTRAC).

10
FINANCIAL CRIME PREVENTION
 Standard Chartered Bank Admits to Illegally Processing Transactions in
Violation of Iranian Sanctions and Agrees to Pay More Than $1 Billion6
(Sanctions):
In the given scenario, the Iranian National and the Former SCB Employee had pleaded
guilty on the grounds of criminal conspiracy for the violation of Iranian Sanctions. This criminal
conspiracy continued for the period of approximately three years which resulted in the
processing of various transactions through the US financial institutions for the benefit of Iranian
corporations. US sanctions law exist to protect the national security and integrity of the financial
markets and systems of the country. And, it is the duty of the Global Banks to facilitate these
transactions through the financial institutions if US in compliance with the rules and regulations
of the law. Thus, it has been opined by the Court that the penalty imposed in the given case
would discourage the banks and other financial institutions from acting in favor of other
countries and regulating the transactions in their favor. However, it has been argued by the
defendant that such penalties and punishments in the form of sanctions lead to such
conspiracies due to their sternness of evaluation of the facts and circumstances of the case.
Therefore, it can be explained that such kinds of penalties are imposed for the banks to
understand that they are accountable for any suspicious transaction being notified or calculated
in the system. The sanctions are imposed for the better governance of the corporate institutions to
enhance their compatibility with law and the legal compliances.
6 "Standard Chartered Bank Admits To Illegally Processing Transactions In Violation Of Iranian Sanctions
And Agrees To Pay More Than $1 Billion", Justice.Gov (Webpage, 2019)
<https://www.justice.gov/opa/pr/standard-chartered-bank-admits-illegally-processing-transactions-
violation-iranian-sanctions>.

11
FINANCIAL CRIME PREVENTION
 Commonwealth Bank hit with fresh terrorism financing allegations by
AUSTRAC7 (Terrorist Financing):
 The Commonwealth Bank was alleged with organized money laundering operations by
the gangs and terrorists who are involved in grievous criminal activities. Such allegations
were brought be the AUSTRAC followed with such 100 instances of breach of laws of
money laundering. The ATM network and the Deposit machines across the country is
under the scrutiny of AUSTRAC to track the suspected transactions which may go
unreported or unnoticed. In one instance, the Bank failed to report to the AUSTRAC
about the transaction of 42million$ suspected to be the outcome of drugs and firearm
dealings in the year 2016. The claim also includes the ongoing investigations of
AUSTRAC against the suspicious transactions and despite the demands and the requests
of the police, the Bank fails to notify the governance authority about such activities or
suspicious activities. It was contended by AUSTRAC that any activity amounting to
the violation of the provision of compliance, then the same should be clearly
reported to the authority. However, the Bank argued that such reporting may lead
to the leakage of secret matters related to their customers which may be
contradictory to the provisions of policy stating client secrecy as a code of conduct.
Therefore, it was established that it forms a basis for establishment of transparency
because, clarity can be established only when the corruption is eradicated and the
suspicious activities of terrorist funding are duly reported to the governing authority.
7 "CBA Warned Terrorist His Account Was About To Be Closed: AUSTRAC", ABC News (Webpage,
2019) <https://www.abc.net.au/news/2017-12-14/money-laundering-things-just-got-a-lot-worse-for-cba/
9259034>.

12
FINANCIAL CRIME PREVENTION
 Singapore’s Keppel Pays $422 million to resolve Brazil Bribery Offenses,
Lawyer pleads Guilty8 (Bribery and Corruption):
Keppel Offshore & Marine Ltd. and its US subsidiary were confirmed to pay a penalty of not
less than 422million$ to resolve the issue of corruption with the US, Brazil and Singapore
authorities. It was alleged by the plaintiff that the Keppel paid approximately 55million$ as
bribe to the officials in Brazil during a long scheme continuing for a decade. The US unit
was found guilty of the bribery and Corruption charges. The order also unfolded the plea of
guilty by a senior lawyer of Keppel’s Singapore unit. However, it was contended by the court
that Bribery and Corruption also leads to reputational damage because it proves that the
entity involved in such practice is trying to hide or cover the ashes of its non-compliance or
irregular activities.
Need for Whistle blowing:
Whistle blowers are those who report the irregularities of law or policies or provisions of
law as found in the organization to the responsibilities. Such person exposes any kind of
irregularities as continuing in an organization and its affairs which may be illegal, private,
unlawful, unethical and breaching the provisions of any organizational policies9. The whistle
blower is needed in an organization to attain information with respect to the allegations and
suspicions internally as well as externally. In case of civil disobedience, they focus to protect the
8 "Singapore's Keppel Pays $422 Million To Resolve Brazil Bribery Offenses, Lawyer Pleads Guilty - The FCPA
Blog - The FCPA Blog", Fcpablog.Com (Webpage, 2019) <https://www.fcpablog.com/blog/2017/12/22/singapores-
keppel-pays-422-million-to-resolve-brazil-bribery.html>.
9 Vandekerckhove, Wim (2006). Whistleblowing and Organizational Social Responsibility : A Global Assessment.

13
FINANCIAL CRIME PREVENTION
common people from the wrongs of the government10. Therefore, it can be inferred that the
whistle blowers are the essential intricate port of an organization to ensure governance and
management being effectively enforced in compliance with legal provisions.
10 Delmas, Candice. "The Ethics of Government Whistleblowing". Social Theory & Practice. Jan2015, Vol. 41 Issue
1, p77-105. 29p.

14
FINANCIAL CRIME PREVENTION
BIBLIOGRAPHY:
Journals and Scholars:
Vandekerckhove, Wim (2006). Whistleblowing and Organizational Social Responsibility : A
Global Assessment.
Delmas, Candice. "The Ethics of Government Whistleblowing". Social Theory & Practice.
Jan2015, Vol. 41 Issue 1, p77-105. 29p.
"Handbook on Anti-Money Laundering and Combating the Financing of Terrorism for Nonbank
Financial Institutions". 2017-03-01.
Drakulevski, Ljubomir, and Leonid Nakov. "Strategic approaches to creating and developing the
concept of business integrity." Strategic Management 21.2 (2016): 23-31.
Filatotchev, Igor, Gregory Jackson, and Chizu Nakajima. "Corporate governance and national
institutions: A review and emerging research agenda." Asia Pacific Journal of Management 30.4
(2013): 965-986
Legislations:
Corporations Act 2001 (Cth)
Civil Liability Act
Uniform Evidence Act

15
FINANCIAL CRIME PREVENTION
Cases referred:
"Singapore's Keppel Pays $422 Million To Resolve Brazil Bribery Offenses, Lawyer
Pleads Guilty - The FCPA Blog - The FCPA Blog", Fcpablog.Com (Webpage, 2019)
<https://www.fcpablog.com/blog/2017/12/22/singapores-keppel-pays-422-million-to-resolve-
brazil-bribery.html>.
"Standard Chartered Bank Admits To Illegally Processing Transactions In Violation Of Iranian
Sanctions And Agrees To Pay More Than $1 Billion", Justice.Gov (Webpage, 2019)
<https://www.justice.gov/opa/pr/standard-chartered-bank-admits-illegally-processing-
transactions-violation-iranian-sanctions>.
"CBA Warned Terrorist His Account Was About To Be Closed: AUSTRAC", ABC
News (Webpage, 2019) <https://www.abc.net.au/news/2017-12-14/money-laundering-things-
just-got-a-lot-worse-for-cba/9259034>.
Websites:
OECD 2010, OECD Economic Globalisation Indicators, OECD Publishing, available at
www.oecd.org/sti/ind/measuringglobalisationoecdeconomicglobalisationindicators2010.htm.
Sun, Leo, "Why Is Corporate Governance Important?", Businessdictionary.Com(Webpage,
2019) http://www.businessdictionary.com/article/618/why-is-corporate-governance-important/