As the number of money laundering and financial crime cases keep growing, Sigma Ratings argues that it is time for financial services firms to rethink risk management.
Hamad Alhelal, director of financial crime intelligence at Sigma Ratings, wrote in a new blog that new technology and the increased risk of crime means businesses have to step up their game.
Quoting a PwC report from 2016, Alehlal said that there are three lines of defence that businesses must strengthen.
Alhelal identified the first line as the sales team, whose “lack of accountability, unclear understanding of their role, and the wrong tone from the top hinder their ability to be the first line of defence.”
He said that things were not much better among the second line of defence: the compliance teams as they struggled with “silloed departments, poor coordination, and a failure to use technology and data more effectively.”
“But most importantly, the second line is burdened with performing first line functions, and as a result, is unable to review and challenge the first line’s risk assessments, which Sigma has observed during numerous Certified Rating assessments,”Alhelal argues.
He identified the third line as the audit teams whose “main issue appears to be outdated data management and analytics.”
“And with improvements in technology, innovation and new regulation, the three lines of defence model will continue to grow in complexity,” he said. “The time is ripe for companies to rethink risk management culture from the inside – by empowering the three lines to make sure they don’t lose sight of what they are actually defending – the public interest.”
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