PIMFA Financial Crime Conference: Economic Crime Costs the UK £14.4 Billion A Year
Wednesday 20th March 2019
On Tuesday 19 January, PIMFA, the trade association for personal investment managers and financial advisers, held its annual Financial Crime Conference. The event, sponsored by BDO, welcomed professionals from across the industry as well as from the regulatory, law enforcement and cyber security fields, to address key issues within the financial crime landscape, including the impact of advancements in technology and threats to data flows from Brexit.
Financial crime risk is ever present and increasing. Figures from the Financial Conduct Authority (FCA) show that suspected money laundering and other financial crime continue to be areas of significant concern to the UK financial services industry*. As a result, the industry is investing millions of pounds every year in anti-money laundering procedures and in security systems to counter cyber-attacks and root out fraud**. Additionally, regulators have been working to implement stricter controls. Earlier this year, the Home Secretary and Chancellor announced they’ll be co-chairing a new government taskforce, called the Economic Crime Strategic Board, to work with senior figures across the UK financial sector to tackle economic crime, which is estimated to be at least £14.4 billion per year.
During his welcoming address, John Barrass, PIMFA’s Deputy Chief Executive, explained the importance of the event: “The aim of our conference is to highlight the problems that financial crime presents to our members and to provide an opportunity for the industry to discuss and consider possible solutions to their concerns.”
The conference began with Chris Ninan from Herbert Smith Freehills detailing a range of financial crime-related issues that the regulatory community is currently examining, including the European Supervisory Authorities’ (ESA) consultation on EU anti-money laundering supervision. He also highlighted anti-money laundering (AML) procedures that firms should consider incorporating and provided examples of failures within a financial organisation that firms should avoid.
Simon Walton and Chris Pulham, from Rosenblatt, highlighted just how the General Data Protection Regulation (GDPR) affects financial organisations, and how the procedures and regulations in place can help firms fight financial crime. They also touched on Brexit, and how the UK leaving the EU could affect international data transfer and what firms should be considering when planning for the UK becoming a third country.
Director of EveryCloud Security, Rob Mukherjee, advising on how best to fight against phishing, detailed techniques used by the attackers and explored how financial services firms can mitigate ever more sophisticated phishing campaigns. Rob said “Cybercriminals are targeting the financial services industry three times more than any other sector – and 95% of cyber-attacks start with phishing. It’s not a question of if – but when – you will be targeted.” He also highlighted the need for tighter security measures, “on average, most people have just three passwords that they use for as many as 30 different applications – it’s not very secure and not good enough in this climate”.
Steven Garner, Director of Grandeo, discussed how Distributed Ledger Technology (DLT), or Blockchain, could help combat financial crime, saying: “financial institutions and regulators must take the lead and move forward beyond the check-box approach to embrace AI and blockchain as a means of protecting the industry and its clients, just as other countries have done. The government, which once shied away from blockchain, now realises its potential as it creates a full audit trail – a chain of every single transaction – and will be a great step to help combat money laundering and other financial crime”.
Fiona Raistrick from BDO detailed a viable and interesting quantitative method by which firms could identify and assess financial crime risks in sectors of their business and evaluate how well they were dealing with them. She made clear that the methodology should be an issue for adoption within a firm’s business strategy by top-level management and that firm governance, from the CEO downwards, should be involved in preventing financial crime. It was not an optional extra to bolt onto the side and leave to the MLRO and compliance.
Sandip Patel QC from Scarmans highlighted that firms are required by law to report any tax evasion suspicions, and that new clients who are investigated before taking them on as a matter of due diligence should also be assessed for possible tax evasion if that looked to be remotely likely. He examined theoretical scenarios of what would and would not constitute failure to report possible tax evasion, and warned what red flags firms should keep an eye out for, noting that even the staff of firms had been known to utilise firm facilities to carry out tax evasion activities.
Martin Lines from Just Group shared key statistics to highlight how financial crime could impact anyone at any age, at any stage of their lives, and why “firms should be looking at every client as ‘vulnerable’ – as 1 in 5 (19%) of adults in the UK, or their partner, has experienced divorce, redundancy or death of a family member in the last 12 months. These are just some of the things that could immediately impact a client’s vulnerability.” Vulnerable clients are often the most exposed to financial criminal activity and need all the protection that firms can offer.
Paul Hoare from the National Crime Agency, spoke about the impact of cyber-attacks on a firm and the benefits of having a proper cyber-security system in place. “Within the FTSE 350, 68% of firms have no training on cyber security and as little as 10% have no plan whatsoever in place if there was a (cyber) security breach. Firms must understand that just having an IT team is not an effective cyber security measure: IT and security are not the same thing. Organisations have been held to ransom and others have completely ceased due to cyber-attacks. 96% of data breaches are rooted in email attacks and a change in culture of how information is shared and managed is essential. Having proper security costs money but if it stops one breach, it’ll be worth it.”
Alongside the practical hints and tips on how to tackle financial crime, PIMFA announced their partnership with digital security firm, Beyond Encryption – a provider of secure messaging and digital engagement solutions for Enterprise, SME businesses and their clients. With over 280 billion emails sent each day, many containing sensitive information or confidential attachments, Beyond Encryption provides businesses and consumers a safe, easy way to communicate securely and enable member firms to reduce commercial risk and safeguard sensitive email information in a secure and simple solution.
Notes for Editors
* FCA Financial crime: analysis of firms’ data; November 2018 – Read Full Report Here
** Source: HM Treasury, Home Office, The Rt Hon Philip Hammond MP, and The Rt Hon Sajid Javid MP, 14 January 2019 – Read News Story Here
About PIMFA – the Personal Investment Management & Financial Advice Association
- PIMFA is the leading trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
- PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
- PIMFAleads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
- PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association going back for 28 years – read more.
- Further information can be found at pimfa.co.uk
- To become a member of PIMFA for access to training, benefits and discounts, please visit https://www.pimfa.co.uk/become-a-member or contact us directly at [email protected]
About MailLock from Beyond Encryption
- Beyond Encryption provides secure messaging and digital engagement solutions for Enterprise, SME businesses and their clients. Our solution creates competitive advantage by securing existing communications, increasing B2B and B2C client engagement and reducing commercial risk.
- Businesses have a duty of care to secure critical information as custodians of their client’s data. Securing client communications and helping protect their data and their identity can unlock ethical and environmental benefits whilst substantially reducing regulatory risks. Enhanced compliance, audit and control are key benefits in meeting these regulatory requirements.
- Founded in 2013 Beyond Encryption counts many global professional and financial services businesses amongst its clients. With a core focus of securing digital communications we are trusted advisors to our clients on their regulatory and technical requirements.
- For more information about our Identity Secured Communication® solutions please contact Beyond Encryption at [email protected], visit our website at www.beyondencryption.com or call us on 0208 123 4546
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