08.03.

2023

Financial Crime Risk Assessment

What is Fraud?

 A dishonest artifice or trick.

 A person or thing not fulfilling what is claimed or expected of it.

What is Bribery?

 Bribery refers to the offering, giving, soliciting, or receiving of any item of value as a means of
influencing the actions of an individual holding a public or legal duty.

What is Corruption?

 corruption is the abuse of entrusted power for private gain. Corruption corrodes trust, weakens
democracy, obstructs economic development and further exacerbates inequality, poverty, social
division and the environmental crisis.

What is Internet Fraud ?

 refers generally to any type of fraud scheme that uses one or more components of the internet
 such as: chat rooms, e-mail, web sites

The prevalence of law:

 international treaties
 local constitution
 local laws
 specialized official authorities decisions
 specialized official authorities instructions
 institutional internal policies
 departmental internal requirements

GRC Predicate offence:

 Arms Trafficking
 Arson
 Corruption & Bribery
 Environmental Crime
 Extortion
 Forgery
 Fraud
 Human Trafficking / Migrant Smuggling
 Insider Trading & Market Manipulation
 Tax Crimes
 Terrorism / Terrorist Financing
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Categories of Financial Risks (GRC ) risk:

- Credit risk - Market risk - Liquidity risk

- Operational risk - Reputational risk
- Volatility risk - Settlement risk - Profit risk - Systemic risk
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Risk appetite:

 Willingness to take risks

 Asset class and investment product reflect it

Risk capacity:

 Ability to take risks

 Will depend on personal factors like age, income, levels

Risk tolerance:

 Defines limits or boundaries of the risks

 Downside risk tolerance of 15%

Institutions are required to do the following:

1. Periodic review of relationship (Ongoing, KYC) ‫اجراء مراجعة دوريه للعالقة مع العمالء‬
2. Risk Based Approach (RBA) ‫بعد وضع تدابير و إجراءات للمراقبة ترتكز على المخاطر‬
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Fraud:

 Opportunity
o Lack or end-around of internal controls
o Senior management watching
 Motive / pressure
o Personal financial pressure
o Addiction
 Pationalization
o “ I haven’t received a raise”
o “ it’s only a loan; I’ll pay it back”

The grand corruption administrative:

 Political competition
 Economic competition
 Regulatory environment
 Social attitudes and behavior

What causes people to commit fraud (opportunity) :

- Lack of supervision
- Poor internal controls
- Poor record keeping
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Profiling a fraudster:

 Identification of the fraudster

o Type of attack, Type of target
 Analysis of the fraudster
o Intention, Motivation, Knowledge / skills
 The profile structure of the fraudster
o Skills , abilities, techniques, purpose, motivation, opportunities

How Identity Theft Happens?

 Data breaches
 Unsecure browsing
 Dark web marketplace
 Malware activity
 Credit card theft

5 top types of fraud:

1. Customer fraud
2. Cybercrime
3. Accounting fraud
4. Asset misappropriation
5. Bribery & corruption

GAP analysis for strategy execution review:

1. GAP identification 2. Root – cause analysis 3. Improvement plan

Beginning to Identify &

Detect Considering the
Gaps in Internal Control
Structure:

1. Plan
2. Do
3. Check
4. Act
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Preventative controls, examples include:

1. Segregation of duties
2. Physical controls over assets

Identifying Detective Bribery Controls:

 COSO is an acronym for the Committee of Sponsoring Organization The committee created the
framework in 1992, led by Executive Vice President and General Counsel, James Treadway, Jr.
along with several private sector organizations, including the following: American Accounting
Association.
 COSO is a joint initiative of five private sector organizations and is dedicated to providing
thought leadership through the development of frameworks and guidance on enterprise risk
management, internal control, and fraud deterrence.

COSO Internal Controls Framework:

- Monitoring
- Control activities
- Risk assessment
- Control environment

Symptoms of fraud:

 Accounting anomalies
 Internal control weaknesses
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 Analytical anomalies
 Tips and complaint

Data-Driven Analysis Using Data-driven Fraud Analysis Techniques:

1. Understand the business

2. Identify possible frauds that could exist
3. Catalog possible fraud symptoms
4. Use technology to gather data about
symptoms
5. Analyze results
6. Investigate symptoms

Many types of bribes exist:

- Tip - Gift - Discount

2 types of fraud:

1. Fraudulent financial reporting

2. Misappropriation of assets
o Skimming of cash and cash larceny

Consumer risk:

 Value and backing

 Accountability
 Security and technology risks
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 Privacy risks
 Payment risks