Jody Houton

Multi-billion dollar fines, bad press, harm to brand reputation, and plummeting share prices: just a few of the potential repercussions of working with “bad actors” in the financial services sector.

The recent fall of HSBC and Barclays’ share prices, following a spate of press coverage into the movement of large sums of allegedly illicit funds, highlights the importance of monitoring internal communications and taking every single preventative and reactive step possible to run a fully compliant house – before internal problems become external.

The media reports were based on a leak of more than 2,000 suspicious activity reports (SARS), which detailed US$2 trillion worth of potentially corrupt transactions washed through the U.S. financial system between 1999 and 2017.

In a statement, HSBC, which was one of five big banks involved in the scandal, said that the information was historical and in 2012 it had begun to “overhaul its ability to combat financial crime.”

However, the fact that so many SARs were filed also suggests that many of the banks were aware of the likelihood that they were providing financial services to high-risk individuals.

Interestingly, the filing of an SAR does not require the bank to cease doing business with the client in question. This means the practice is often enacted as a “get out clause” and sometimes exploited by less scrupulous banks (not in reference to any of the aforementioned banks) to cover themselves, before continuing to work with a high-risk individual. Mostly, SARs go into a never-looked-at bucket until the press gets wind of something, or it becomes part of a larger action/case. Of course, if a SAR is found to be warranted, an MRA/MRIA (Matter Requires Action/Immediate Action) is issued, with a dated response, and an expected remedy.  

The plummeting share prices show that even if a bank is operating in accordance with external regulations, although it may save them from massive multi-billion dollar fines, it does not safeguard them against other blowbacks, such as negative press coverage.

With the world’s best global detection rates of true positives, Behavox Compliance utilizes more than 80 scenarios, including specific Wash Trade and Money Laundering scenarios, to help organizations uncover hidden risks within their internal data. It works by enabling firms to detect communications data that contain certain lexicons, such as “round-trip”, “back-to-back trade”, “switch trade”, “rush buy” and many more. This allows the organisation to gain actionable insights and accurate context in which to make an informed decision of how to deal with internal issues, before they become external. Before it becomes too late.