Associate Menelaos Karampetsos provided an analysis of financial crime compliance in the U.K. in an article for the January 2024 issue of Financier Worldwide.
The article, entitled "In the eye of the storm: financial crime compliance in volatile times," compares financial crime compliance efforts with the beginning of William Shakespeare's play "The Tempest," which opens on a ship in the middle of a violent storm as the crew attempts to battle through.
"Professionals in financial crime compliance who are already working hard to keep the ship afloat, should perhaps pay heed to another of the Bard's plays and stiffen the sinews as their work becomes ever more critical in ensuring that the firm is able to operate in accordance with its obligations," Karampetsos wrote.
An action that is permitted under one sanctions regime may be prohibited under another, which may create issues for cross-border operations in terms of execution, continuity and even staffing, he warned. It is also challenging for businesses with subsidiaries in different countries to ensure compliance with those sanctions throughout the business chain.
Another area of concern, he wrote, is ransomware, which the U.K.'s National Cyber Security Centre has warned may be an "enduring and significant" threat, partially because of the rise of state-aligned groups and an increase in aggressive cyber activity.
"A key and geographically agnostic type of financial crime is environmental, social and governance (ESG)-related crime," Karampetsos stated. "ESG considerations are increasingly incorporated in financial crime systems, as firms become more cognizant of the connection between illicit trade practices and crimes such as money laundering, modern slavery and human trafficking. ... Compliance is not, and cannot be, immune to geopolitics."
Using sanctions as an example, current trends have shown that the U.S. and the U.K. will often operate in lockstep in terms of designations, including in some business sectors, he wrote. Geopolitical concerns have also been explicitly acknowledged in the imposition of sanctions.
"Screening tools alone are insufficient in terms of ensuring that a firm has a holistic understanding of its exposure to sanctions," Karampetsos added. "Knowing which areas are or may be the focus of sanctions is paramount, as is monitoring judicial developments."
Read the full article here.
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