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An Examination of the Impact of Covid-19 on Financial Institutions Ability to Comply with Anti Money Laundering Legislation and Fraud Prevention Policies

Richardson, Katie (2021) An Examination of the Impact of Covid-19 on Financial Institutions Ability to Comply with Anti Money Laundering Legislation and Fraud Prevention Policies. Undergraduate thesis, Dublin, National College of Ireland.

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The objective of this research is to examine how the Covid-19 pandemic impacted financial institutions' ability to comply with anti-money laundering legislation and fraud prevention policies.

The questions which will be examined within this study are as follows:
• What was impacted?
• Why was it impacted?
• How could the impact have been prevented?

Brief Background
This topic was chosen based on personal experience gained throughout a twelve-month placement as a Compliance Officer in a Fund Administration Bank, where it was witnessed first-hand the impact of the pandemic on a firm’s ability to comply, contrasted with the ease of compliance observed prior to the pandemic. The topic was also chosen due to a personal interest to further my career and education surrounding Compliance activities within Funds.

The Covid-19 pandemic had a significant impact on financial institutions such as Fund Administrators. As the pandemic progressed, Work from Home (WFH) measures impacted the traditional daily workflow, {Meetings, “Water-Cooler Talk”, In person Management} the ability to obtain and authenticate required documentation from clients, {Wet Ink Signatures, Up-to-Date passports, Proof of Address} and a significant increase in fraudulent activity {Phishing attempts and illegitimate trade orders}. All of these issues combined made it more difficult to carry out regulatory required duties, in order to remain compliant with the legislation.

These formulated issues pertaining to operations {ability to calculate NAV’s on time, correctly input trade orders, verify card usage as online orders rise}, regulatory compliance {Culture, Whistleblowing, PCF approvals}, and putting in an effective work from home order to comply with public health regulations. Many staff had no previous experience with working from home and/or had no suitable workspaces at home. There was a rush in many companies to get junior staff members approval to work from home, as in many companies work from home privileges are only available to senior staff members.

Along with the lack of support from legislators and Government, money laundering vulnerabilities and the growing risk of fraud appear to have gone unnoticed in comparison to the robust health regulations implemented by the Government. Governments all around the world prioritised public health and hospital capacities over many industries such as hospitality, educational and in this case, banking. Support slowly trickled in as industries began to reopen, but at this stage, most of the damage around market instability, fraud attempts, and money laundering had been met by Compliance and Anti Money Laundering teams.

This study will examine and critically analyse what experts are saying about the sector during the pandemic, by using industry publications such as the Financial Action Task Force (FATF). This study will also conduct a survey to gather a wider scope of opinion of the impact Covid-19 is having on their ability to continue to comply with regulatory requirements, using various financial institution contacts obtained throughout a twelve-month placement and current employment connections.

Since this dissertation is predominantly a non-empirical study focusing on qualitative data, literature will be pivotal in providing assistance to the research. Since Covid-19 is in the early stages of research, this study will rely on the peer-reviewed journals which are available and rely also on publications from regulatory bodies and accredited educational and professional boards such as the Institute of Banking and Association of Compliance Officers Ireland (ACOI).

Using sources from Central Bank, Association of Compliance Officers of Ireland (ACOI) and Financial Action Task Force (FATF), all of which are either accredited educational bodies or governing bodies surrounding Compliance within Financial Institutions. They will assist in shaping the backbone of this dissertation.

This research will also rely on the knowledge of other Compliance and Anti-Money Laundering Officers, utilising distance interviews and semi-structured surveys to obtain a large wealth of knowledge on their challenges faced during the pandemic. In order to obtain a wide-ranging perspective of the industry, the scope of the interviews and surveys will include members of the Association of Compliance Officers (ACOI) from a variety of financial institutions, including fund administration, retail banks, and corporate banks. The purpose of the interviews and surveys is to gather a broad spectrum of opinion from various different types of financial institutions on how the global pandemic affected their industry in terms of compliance with legislation.

Overall Aims
Overall, the objective of this research is to determine the true impact of Covid-19 on all financial institutions' ability to comply, where the problem lies within the legislation, and whether the responsibility rests with financial institutions' poor handling of pandemic. It is important to find these answers within this study, as it firstly, prove or disprove the hypothesis and secondly, it will offer insight into the industry, which will allow for further planning and study on the topic of legislation within the financial industry. The study will also look at how legislation did not into consideration a widespread Business Continuity Plan (BCP) being enacted and how an impact such as this, could be prevented in future instances.

Business Continuity Plans are a set of policies and procedures using systems that prevent potential threats to the normal operation of businesses. This could include renting an offsite
office in the event of a fire/flood or in this case the implementation of a remote work system (Virtual Private Network) where employees are able to access their work desktop from anywhere in the world.

Nobody could have predicted a global pandemic, but due to the bureaucratic requirements of the Criminal Justice Act (CJA) and the Central Bank of Ireland (CBOI), regulation and legislation is inadequately equipped to allow employees within a financial institution, particularly Compliance and Anti-Money Laundering teams to work from home on a long-term basis.

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HV Social pathology. Social and public welfare > Criminology > Crimes and Offences
H Social Sciences > HG Finance > Financial Services
H Social Sciences > HV Social pathology. Social and public welfare > Criminology > Crimes and Offences > Money Laundering
Divisions: School of Business > BA (Honours) in Business Studies
Depositing User: Clara Chan
Date Deposited: 04 Feb 2022 14:16
Last Modified: 04 Feb 2022 14:16

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