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The International Compliance Association Find Cryptocurrencies Have a Compliance Concern

In a global survey of sanctions and compliance professionals recently conducted by The International Compliance Association (ICA) – part of Wilmington plc – cryptocurrencies and emerging financial technologies have been highlighted as an area of sanctions compliance concern.

From 401 respondents who completed the survey in July, almost half (46%) suggested greater training and education is needed around crypto/digital currencies and emerging financial technologies in relation to sanctions compliance.

Ross Savage, Course Director and Global Lead – Sanctions Compliance at ICA confirms: “With the rapid rise in crypto and digital currencies and emerging financial technologies, naturally, regulations continue to evolve. It means that organisations operating across multiple jurisdictions constantly need to review and assess the impact of new legislation and regulation. Therefore, we were keen to identify the main sanctions risk management challenges faced by business leaders and organisations operating around the world.”

Respondents came from a range of industries including banking, accounting, asset management, insurance, payment services and betting and gaming. They highlighted the impact of digital currencies and emerging financial technologies as an area of concern, but wider challenges related to training were also identified.

For example: 70% of respondents have undertaken less than ten hours of training on managing sanctions risk over the past 12 months. 10% had undertaken no training, while the majority – 39.4% have undertaken less than five hours. 13% said no sanctions-specific training has been delivered to staff.

To look at this further, of those who said no sanctions-specific training had been delivered, 71% of those work in firms with 100 or more employees.

Firms cited potential reputational damage (42%) as their biggest concern in terms of sanctions risk, over concern about substantial fines (27%), followed by inability to conduct business (13%) in specific geographical regions. However, sanctions are a crucial instrument in the international battle against financial crime, proliferation, terrorism, and human rights abuses. Those who manage the risk need the right combination of knowledge, capabilities and behaviours to manage it effectively and our survey perhaps points to the need for a greater awareness of the impact and real-world consequences of financial crime.

It was positive news that 68% of respondents confirmed their business had undertaken a sanctions risk assessment in the past 12 months (18% have not). However, a third (32.9%) of firms have not assessed sanctions risk across their supply chain in the past 12 months, and a quarter of respondents were ‘unsure’. This does highlight the need for business leaders to understand the nature of the entirety of their supply chain at a granular level to remain compliant.

Interestingly, when asked if their organisation has a dedicated person employed to assess sanctions risk, more than a quarter (26.4%) said no, of which 65% of those are firms that employ 100 or more people.

Increasing complexity was cited as the biggest challenge to managing sanctions risk according to 39% of respondents, followed by lack of staff awareness/education on the related risks (26%), again pointing to the need for more training relating to sanctions.

Although a significant number (85.5%) of respondents use screening software to help manage sanctions risk, more than two thirds (64%) had problems with false positives – 23.9% saying a definite yes, while 39.85% suggesting that false positives are ‘somewhat’ of an issue.

Ross Savage continues, “With 55% of respondents expecting to make changes to their sanctions risk programme in the next 12 months (20% major changes, 34% minor changes), this offers an opportunity to broaden training programmes to ensure staff are fully equipped to understand the changing nature of sanctions risk and control and the full consequences of non-compliance.

“Putting sanctions into perspective, framework controls are now a matter for the whole senior management team and board members to ensure compliance with regulations and ultimately protect the firm across increasingly diverse supply chains, against the backdrop of an ever-changing landscape. At ICA, we are committed to helping our members and learners navigate the complex world of sanctions across multiple jurisdictions with our range of courses, qualifications, CPD and network support, aiming to go beyond training to affect behavioural change.”

Author

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

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