Recent corporate scandals and collapses such as Wirecard, Carillion, BHS, and the infamous Enron case draw out one recurring theme - how to keep auditors accountable. Conflicts of interest, poor quality and lack of independence have been the hallmarks of the recent scrutiny on audit firms across the UK and globally. As a response, reform is underway within the UK; HM Treasury has announced plans to reform the audit sector to promote quality and competition.
Whilst these reforms focus on corporate reporting, they also raise other questions - should regulated firms reflect on their financial crime audit process and is it time to shake things up?
The value of conducting a financial crime audit cannot be understated - simply put, it helps identify issues and deficiencies in your anti-financial crime (AFC) controls and systems and supports your regulatory compliance. It has long been a regulatory requirement; the Financial Conduct Authority’s Financial Crime Handbook highlights an independent audit (internal or external) to monitor effectiveness of your AFC controls as a best practice. The European Banking Authority’s Guidelines on the Roles and Responsibilities of a Compliance Officer set out a clear expectation for annual independent (internal or external) AML audits to assess the effectiveness of controls, with the findings reported to senior management. Many partner banks also require to see financial crime audits from their account holders, with some having approved provider lists or set criteria.
With regulatory scrutiny only increasing, it is clear that a ‘check-the-box’ approach to AFC is no longer sufficient. Regulators not only expect firms to conduct an audit but are insisting audits are robust and are conducted by experienced and skilled AFC experts. This reinforces the importance of having a strong audit partner alongside strong internal controls and oversight.
We know that when you have built a strong relationship with your auditor over a number of years and they know your business well, this can be hard to walk away from. But this is often a key reason to make the leap.
Only the largest businesses in the UK are required to change auditors on a regular basis. For most firms, there is no strict obligation and it’s up to the firms to realise when they may need a fresh look from a new objective partner.
Your needs and business relationships will shift with time and circumstances. And this means your auditing needs may change, too. Sometimes it’s quite clear you need - or want - a new auditor, other times less so. However, changing your auditor periodically can bring advantages to your firm, whether that be fresh insights, a new perspective, or deeper sectoral expertise. It can:
Provide a new perspective - a new AFC audit firm may improve the robustness of your controls by asking different questions and taking a fresh look at your existing approach. Having access to different industry leaders and tapping into their deep sectoral knowledge and experience may be a draw.
Provide objectivity - if one audit firm has reviewed your controls and processes year-in year-out, it may be more difficult for them to be objective or proactive in identifying issues that have previously been overlooked. Working with a new audit partner helps address this potential risk.
Support the growth of your firm - as your firm grows you may start to offer new products or become more international, meaning that what was right for you in the past may not be right for you now. You may need an AFC audit firm with specific expertise in your current products, risks and markets.
Improve the quality of your current engagement - how an AFC audit is delivered matters. Audits should not adopt a one-size-fits-all approach; the ability to customise them to your needs is key. Rather than settling for your current audit partner for the sake of simplicity, consider if there are other firms that can offer you a better service.
Increase value for money - price and service is often what this decision comes down too. A fair and competitive price from a firm equipped to respond to your needs quickly, with individuals willing to have open and frank discussions, will set a solid foundation for an effective and efficient audit.
Overall, the considerations for finding the right AFC audit firm to support your needs are unique for each business. A high-value, quality audit partner will understand your type of business and its financial crime risks, know the industry well, and use that knowledge to translate information into valuable and actionable insights. A firm that focuses on attention to detail, offers practical and implementable recommendations, provides a responsive service and establishes a trusted relationship will be the right firm for you - for a few years of course!
So what is FINTRAIL’s position? While normally we are delighted when clients come back to us year after year, with audits we take a different view and practise what we preach! In line with professional standards, we advise clients to rotate away from us after three years to allow for a fresh set of eyes to review their programme. They can always come back to us down the line, but we know that rotating to another audit provider for at least a year or two will benefit them most in the long run.
About FINTRAIL
At FINTRAIL we are passionate about combating financial crime. We have extensive experience conducting audits and assurance processes for financial services businesses. Our approach focuses on both ensuring regulatory compliance, and making suggestions for how firms can improve their operational effectiveness.
We have conducted audits covering financial crime and regulatory compliance across multiple sectors including retail and personal finance, business banking, payments, forex, investment, banking-as-a-service, and crypto. We also have significant international experience, conducting multi-jurisdictional audits across Europe and APAC.
Our unique team of experts is drawn from the industries we support and has deep hands-on experience in leadership roles with leading banks, FinTechs, and other financial institutions. Our approach is tailored to the unique circumstances of each client, is regulatory and technology driven, and is focused on providing excellent customer outcomes. We offer our clients pragmatic solutions to the most complex challenges.
Our goal is to ensure our clients can thrive, free from the negative impacts of financial crime.