Developing a consolidated Financial Crime Business Wide Risk Assessment for an investment brokerage

Our client is an inter-dealer broker providing a range of services in exchange traded and over-the-counter financial instruments and related derivative products.

The Firm had self-identified that, whilst it had a range of risk assessments in place to address Financial Crime (FC) risks it did not have a Business Wide Risk Assessment (BWRA) nor any formal consolidation of risk assessments so as to allow evaluation of risks at an enterprise-wide level. The Firm asked Pathlight to support them in the development of BWRA.

As with many Firms in the sector, they had also recently been subject to an AML systems and controls review as part of the FCA’s proactive work around Money Laundering Through the Markets (MLTM) which flagged the absence of a BWRA.

Our FC team worked closely with the Firm to develop a BWRA using a workshop driven approach. This allowed the development of a BWRA that is reflective of the business risks and needs, allowing the Firm to maintain ownership but where Pathlight supported the process.

This BWRA focused on a range of risks including Anti Money Laundering; Counter Terrorist Financing; Relevant Sanctions; Anti-Bribery and Corruption; Tax Evasion; Proliferation Financing; Market Abuse / Trade Surveillance; Fraud and Insider FC Risks.

We undertook the following approach to development of the BWRA:
• Agreement of a BWRA methodology and format that could be repeated by the Firm in the future;
• Review of the existing risk assessments so as to utilise helpful collateral;
• Preparation of framework questions to prompt discussion of inherent risks, mitigations and residual risks in relation to each content areas;
• Facilitation of workshop(s) to discuss and review the Firms response and finalise the Inherent Risk / Residual Risk ratings.

The Firm was able to develop a BWRA that covered all FC risks faced by the business. The engagement also gave them a repeatable methodology for conducting future BWRAs and for introduction of new risks should they emerge. The Firm now has a robust understanding of the risks they face and knowledge of any gaps and areas requiring mitigation.

The workshop approach allowed all key stakeholders to participate in the journey, input their business knowledge and raise their awareness of risks in general.