• Accounting
• 2021-07-29
• Mr. Wasim Firoz

How To Prevent Businesses From Financial Crime?

Every Business has to face the risk of financial crime. Due to digitization growth, financial crime is becoming a more crucial issue for global businesses like online banking. It’s become a game between financial criminals and authorities. Authorities always try to prevent crime in the organization and Criminals try to make new different strategies to perform the crime and harm the organization.

Financial crime is also a critical challenge for banks, individuals, and institutions. Financial authorities and regulators always work to introduce new rules and regulations to stop, combat and prevent financial crimes. The most common financial crime forms face money laundering, terrorist financing, fraud, tax evasion, and corruption.

What Is Financial Crime?

Over the last 3 years, financial crime is increasing and becoming a significant concern for governments in the world. Financial crime is the crime where one party takes the benefits of the crime financially and the second part faces financial loss. It is committed against the property and money for their own profit that belongs to someone else by the individual and organization. It can happen in several different forms and can happen anywhere in the world. In simple terms, someone or an organization performs an illegal activity to take over the property, money, etc for their financial benefits that belong to others. 

What are the main types of Financial Crime?

We have mentioned below the types of financial crime and their short definitions.

1. Money laundering - It is the process of changing a large amount of the money which is earned by criminal activity.
   
2. Terrorist Financing - Terrorist financing is the illegal smuggling of cash that is delivered to the terrorist. It’s linked to money laundering.
3. Fraud - Accomplished property or money by deceiving someone else.
4. Electronic Crime or Cybercrime - It’s committed by the cybercriminal and hacker to damage someone’s security and computer.
5. Bribery And Corruption - Giving and receiving unearned money. Giving and receiving bribes.
6. Tax evasion - Avoid paying the tax by hiding real income.
7. Forgery - Use of false documents, altering, and false writing for our benefits.
8. Identity Theft - Steal some identity or financial information to commit fraud.
9. Counterfeiting - Use someone else's identity for manufacturing or distributing of goods.

Who Commits The Financial Crime?

Before talking about the person who performs the crime in the business, let’s move from the topic and think, you are walking on a road and suddenly someone came with a weapon or knife to steal money. Same in the business employee, a business leader suddenly commits the crime in the business individually or with the collaboration of the outsider of the business.

1. Employees - Employees can commit a financial crime when they have access to confidential and important information about the business and they know how to control to perform the crime.
2. Business leaders - Senior managers or executives don’t present the proper and complete financial data and prepare a plan for the future to steal business funds and assets. 
   
   
3. Employee collaboration with the outsider Fraudsters - Sometimes employees meet with Fraudsters or Fraudsters meet with the employee to perform the crime in the business. By doing this they can easily carry out the crime easily to achieve bigger and greater harm to a business.
   
   
4. Customers and suppliers - Supplier and customer can perform a criminal activity in business by using various forms of crime.

How To Prevent Financial Crime?

You would have heard the quote that “prevention is better than cure”. Of course, prevention is better than cure. Business owners should give priority to prevention so that they will not have to face any financial crime. Some important tips to prevent financial crime.

1. Internal Audit - The most common method is internal audit. Businesses should conduct internal audits yearly or half-yearly. It will provide you with a correct financial report and several other important pieces of information about the business. It will also show you risk and crime are there or not.
   
   
2. Law - Every country in the world has its own rules and regulations. Every business owner should keep updating himself about the change in the laws that are relevant to the business.  Businesses should ensure that we are doing our business as per government law and regulation. If we ignore applying in business, the fraudster can take advantage of performing the crime in your business organization.
   
   
3. Risk Assessment Right - The policy to stop financial crime is to try to get your well-thought risk assessments right. It’s true that all businesses have finite resources. But by focusing on your key risk area you can use your resources well to prevent crime.
   
   
4. Management - It’s the responsibility of the senior management to keep an eye on the risk area of the business. Business managers should provide proper and complete reports about the business, which help the management, understand the business's actual position and take effective steps.
   
   
5. Right Team - Police, rules, and regulation have not only jobs to prevent crimes, but it also includes the right team of procurement, business development, HR, accounts, customer relations, etc. So that risk from all perspectives can be identified early and easily.
   
   
6. Training of the employees - Keep updating and training your employees about business crime forms, prevention policy, and strategies. So that they can easily identify the crime and combat the crime.
   
   
7. Use of Resources -   Use sophisticated resources to identify the clear picture of the threat and its source easily and quickly.  By using it you can detect the crime before getting any harm in business.
   
   
8. Clients and Supplier Deals - Calculate and monitor the client's and supplier's transactions in different ways as you usually do to avoid crime. It allows firms to find suspicious activity and gives warning signals in advance for the future.
   
   
9. State Law - Every state of the country has different laws regarding financial crime and business. Always monitor the state law and new changes. Implement the new changes in your business that will secure the firm reputation and save you from fraudsters.

If you need any kind of help regarding financial crime or other related issue regarding accounting, Auditing and Taxation then  you have landed right place. Risians Accounting team has good expereince to tackle these kind of issues. Get the free consultation.