How To Prevent Your Business From Financial Crimes?

Financial crimes have been one of the pivotal issues in the global arena for several decades. It is always a cat-mouse game between the authorities and the criminals as authorities are constantly trying to detect and prevent the financial crimes in the firm. On the other hand the criminals are always trying to generate innovative strategies to commit the crime and harm a firm. Financial crime by definition can be referred to as a crime that is specifically committed against the property or money where an individual or a criminal organization takes something belonging to someone else for their own personal benefits.

Some examples of financial crimes are listed below:

1. Money laundering
2. Bribery
3. Corruption
4. Fraud 
5. Tax evasion
6. Forgery 
7. Counterfeiting
8. Terrorist financing and
9. Identity theft

Who commits the financial crime?

While talking about the person who commits the financial crime, let us move away from the idea of a criminal with a knife or weapon who tries to steal the money, literally the financial crimes are committed by the person who mostly disguises themselves as well respected individuals who perform the crime for themselves or their office. We may be able to categorize them as employees, business leaders, organized criminals, external fraudsters in collaboration with employees and customers etc.

“Prevention is better than cure” as the quote itself explains that it's always the best course to prevent problems and disruptions, we can apply the same in the business world, i.e. we should always try to avoid financial crimes and risks before it occurs, otherwise it may cost a lot later. 

Tips to Prevent Your Business from Financial Crimes

Some of the essential practices that may prevent a firm from financial crimes are:

1. The senior management of a firm must always give priority to financial crime risks, and it should be treated as any other risks faced by the businesses. The senior managers must be provided with adequate management information which may help them to understand the actual situation and the extent to which the firm is exposed to financial crime risks prevailing in the firm.  
2.  Always try to get your risk assessment right. The best strategies to counter the crime stem out of well thought risk assessments. The firms have finite resources, but when those resources are used to detect the risks to which a firm is exposed to, is the resource well used.
   
3. Monitoring client’s transactions and accounts is one another way to avoid financial crimes. It enables the firm to detect any suspicious activities carried out, and it may provide advance warning signals of financial threat to the firm.
   
4. Always keep your employees and team trained to identify any kind of financial crime, and provide them with proper understanding regarding the financial crime risks and the strategies to combat those crimes.
   
5. Always try to comply with the laws and regulations of the state which is concerned with financial crimes risks. Compliance with such laws and policies will secure the firm and its reputation in case of any disruption.
   
6. Try to apply advanced analytics to get a clear picture of threats and the source of such threats; this will help to detect the sophisticated threats as early as possible.
   
7. Always monitor the changes in laws and regulations and update the firm’s policies according to the changes brought. If the firm ignores to cope up with changes then it may create a loop-hole which the fraudster can take advantage of to conduct a crime.
   
8. Conduct a deep and thorough due diligence before purchasing or entering into a business with outside parties. This strategy will give you a holistic view of the firm and its dealings through which you can avoid any kind of threats.
   
9. One of the common methods to prevent financial crime is conducting an internal audit after frequent intervals say 6 months or 1 year. Internal audit will provide you with a bunch of benefits; it will not only check your accounts but also ensure that your firm isn’t exposed to any kind of risks.
   

Let us think practically, and consider an example of a firm which was dealing with exports and imports of goods, due to its remarkable progress the owners and the management plan to take over another firm which dealt with the same course of business. When they approached an accounting company for consultation and advice regarding their plan to take over another firm, the first and foremost advice was to conduct a thorough due diligence to have a better insight of the other firm. The firm gave priority to due diligence and at last the due diligence report gave them a clear and transparent picture of the firm. The firm which they planned to take over was indulged in fraudulent activities such as money laundering and tax evasion. That firm also tried to sweep such negativities under the floor but still these financial crimes were detected and the firm was prevented from taking over the other and from bearing huge losses.

The above example provides us a gist of the crimes and the possible ways to prevent your business from those financial crimes. It is difficult to completely avoid such circumstances but we can reduce the burden and the exposure of financial crimes risks by practicing the above listed methods.

How can CDA help?

CDA’s team with its long term experience and strategic approach always focuses on providing all the required accounting and auditing services to its clientele. CDA always understands the economic and business environment of its clients and focuses on keeping it on the right track by complying with the accounting standard and the laws of the land. CDA always tries to combat the frauds and malpractices by monitoring every minute activity of clients.