What is financial crime like today? What form does it take?

First of all, the terms "financial or economic crime" are not a legally defined category. They are mandated to distinguish offences that concern the economic life of a company from conventional offences. I prefer to speak generally of "business criminal law". In the majority of cases, these offences concern fraudulent financial transactions, swindles, breach of trust and fraud. However, a company may be confronted with other problems. By their very activity, operating companies - I am thinking in particular of industry and crafts - create risks for society at large. If we consider environmental standards, for example, criminal proceedings can be instituted if the company is responsible for harmful acts or simply if it does not comply with the regulations in force. Concerns may also be requirements related to safety at work, hygiene rules and the safety of food or non-food products. Often, the rules and procedures in force are not respected owing to negligence inside the company or to save money.

In the financial sector, players are exposed to other risks, particularly in relation to their obligations to combat money laundering and the financing of terrorism. The number of companies subject to these vigilance obligations continues to grow and is no longer limited to banks. Many professionals are required to carry out checks to determine the origin of the money passing through their hands and its beneficiaries.

All this must be considered in a context of increasing digitization of the economy, with the use of new techniques for fraud, Internet scams, data theft or misappropriation and cybercrime.

How are financial players exposed to these challenges? What are the risks involved?

Today, any company is at risk of being accused or incriminated for various reasons, but the financial sector seems to me to be particularly exposed. So much so that it is difficult to predict where the danger may come from. The most obvious cases involve a complaint from a disgruntled customer or employee, for example. The supervisory authorities are stepping up their administrative investigations, which can also lead to criminal proceedings. In addition, the rules against money laundering, which oblige banks and many other players to denounce any suspicion of money laundering, increase the number of prosecutions. Nor should the growing role of whistleblowers or activist associations, who denounce companies and expose them to the risk of prosecution, be under-estimated.

Here the risks are of several kinds. At criminal level, a person judged guilty incurs a prison sentence and/or a fine. In the case of a company, the maximum fine will be doubled, since a legal entity cannot be incarcerated in a prison cell.

As far as companies are concerned, the reputational risk linked to a conviction or simply an accusation must not be under-estimated. If the opening of an investigation against the company is supposed to be secret, there is no absolute guarantee that the public will not be aware of it. A search of a company’s headquarters hardly goes unnoticed.  At the latest, when the trial starts the proceedings will inevitably be public. Despite the presumption of innocence, the image of the company can suffer considerably from these proceedings, regardless of the final verdict.

It is therefore important to be vigilant with respect to these issues.

Faced with increasing risks, how can these issues be understood?

There is no such thing as zero risk. A company will never be able to prevent all criminal risks. The challenge, however, is to do everything possible to reduce them.

This is done first and foremost through prevention, by identifying the legal environment in which we operate and the applicable rules. Some rules are common to all companies, such as those relating to corruption, tax offences or computer fraud. Other rules are specific to each activity. In the field of research or in the creative sector, attention must be paid to counterfeiting and intellectual property issues, for example. In the financial sector, you are directly concerned by the rules against money laundering. In industry, you will have to be vigilant about the environmental and safety standards that have to be observed.

Once the applicable rules have been identified, the risks must be analyzed and procedures implemented to prevent them. Technical solutions can be considered. The organization and procedures will sometimes have to be adapted accordingly. Awareness actions will also have to be implemented as well as training programs. For all of these aspects, the opinion of an external expert, who will verify whether the procedures are in place and whether they are effectively applied, may prove useful.

Finally, it is important to monitor for fraud, to set up investigation procedures in case of suspicion or an alert, and to determine in advance how to react so as not to be surprised in an emergency. It is also necessary, before the crisis occurs, to think about how to limit the damage if necessary.

Listen to the podcast Arendt We Live #7 The challenges of Economic and Financial crimes: prevention, investigations, remediation .