Over the past few years, there has been a fierce global fight against corruption. As a result, financial institutions are learning how to mitigate risk.
AML services are a driving force in helping companies avoid fines and corruption risks through managed services and technology solutions. Specially trained analysts must assess risks, conduct due diligence and KYC protocols, and strengthen compliance programs to be ready to prevent corruption.
The algorithms of AML platforms go beyond traditional data collection and enrich structured and unstructured data, offering AML foundations. This enables a complex and comprehensive business-specific due diligence process and provides a risk assessment at the end of the registration process.
Fighting Corruption on a Global Scale
The UN Office on Drugs and Crime provides recommendations for effective anti-corruption policies. The recommendations cover a wide range of measures, from transparency in the public sector without conflict of interest to developing an information society through public access to information.
Transparency International, a global anti-corruption organisation, discusses ways to fight corruption by closing international gaps. Corrupt officials use offshore banks and financial centres to launder and hide looted state assets.
The European Union has approved the Fourth Anti-Money Laundering Directive. It aims to remove uncertainty regarding beneficial ownership and ensure compliance with FATF standards on anti-money laundering and combating the financing of terrorism (AML and CTF).
The UN Office on Drugs and Crime provides recommendations for effective anti-corruption policies. The recommendations cover a wide range of measures, from transparency in the public sector without conflict of interest to developing an information society through public access to information.
Anti-Сorruption in Projects Financed by the World Bank Group
The World Bank Group conducts a comprehensive review of all potential projects. The World Bank Group works with clients to mitigate identified potential corruption risks. An independent enforcement system includes a Vice President for Integrity who investigates allegations of fraud and corruption in World Bank-financed projects.
A public complaints mechanism is embedded in assignments, and projects are actively monitored during implementation to promote and strengthen monitoring.
Companies involved in fraud or corruption are barred from participating in new activities financed by the World Bank Group. The governments concerned receive the results of the World Bank Group’s investigations. The World Bank Group has imposed formal disqualifications and sanctions on more than 1,000 companies and individuals.
In FY2020, the World Bank Group imposed suspensions or other sanctions on 49 companies and individuals and approved 72 mutual prohibitions from other multilateral development banks. At the end of FY2020, 372 entities were subject to conditional exemption sanctions. This process allows sanctioned companies to improve their internal compliance programs.
What Can Financial Institutions Do to Prevent Corruption?
First of all, they need to put robust compliance programs in place. These programs should include adequate training by experts and advanced technology. These measures include:
- Conducting regular risk assessments to determine the level of risk for each legal entity at the time of recruitment and monitoring changes in danger due to unforeseen events.
- It is conducting third-party due diligence to identify red flags and prevent breaches. Also, ensure that the company is aware of the actions of government agencies relevant to its business.
- Improve communication within the company and with law enforcement. Employees should be aware of their ethical and legal obligations, and, of course, corruption or attempted corruption should be reported to the authorities.
Summary
Corruption is a challenging global problem that requires commitment and collective action. Understanding the different forms and consequences of corruption, developing effective anti-corruption strategies, strengthening governance and institutions, adopting a global perspective, and envisioning a future with less corruption are essential steps on the typical path to a more just and equitable world.
