Banks Face Challenges Following Fifa Scandal

Jun 12, 2015

Written By Phil Beckett, partner at Proven Legal Technologies

Phil Beckett, partner at Proven Legal Technologies, the corporate forensic investigation and e-disclosure firm, discusses the allegations of corruption and bribery in connection with Fifa and the type of advice that financial institutions should be receiving in order to minimise the chance of getting caught up in similar scandals in the future.

British banks have been left to search through more than two decades of transaction data following the recent scandal surrounding football’s international governing body, Fifa. The corruption and bribery allegations mean that banks need to identify exactly when any illicit payments were made and between who. In order to conform to industry regulations and avoid getting caught up in similar scandals, banks need to seek thorough guidance on monitoring and reporting suspicious behaviour.

Slipping Through The Net

With Fifa’s alleged corruption activity spanning 20 years, banks are facing serious difficulties in locating and analysing the relevant transaction data. Rigorous financial regulations have dramatically changed internal protocol and processes in recent years. At the same time, structural changes across British banks, such as split-offs and mergers, have left the banking landscape looking very different now than it did two decades years ago. As a result, many transactions that would today trigger alarms passed undetected at the time, making them difficult to trace in the current Fifa investigation.

In addition to operational changes, banks are also struggling with the fact that they typically just have visibility of one half of any transaction made. This means that an institution will see an incoming or outgoing sum, but have no knowledge of the relationship between recipients, or what happens to the money next. As such, banks are somewhat restricted in linking suspicious activity and individuals. Also, whilst recent changes in regulation ensure that any questionable activity is reported and followed up, this hasn’t always been the case. Although hindsight can often reveal patterns in illicit behaviour, banks sifting through Fifa’s payment history may therefore have difficulty piecing together the transactions due to the vast time lag and industry changes.

Advice On Monitoring

The introduction of more effective consultancy services, strict regulations, and money laundering penalties has led to an increased awareness of financial misconduct within the industry. Banks are increasingly conscious they must watch carefully for signs of any wrongdoing and report them to the authorities or face fines and reputational repercussions. The problem is that although there is heightened awareness, many financial institutions need stronger guidance on monitoring strategies and recognising warning signals. Legal advisors firstly need to ensure that clients are aware of the regulatory demands, and then see that appropriate tools and processes are in place.

In order to recognise unusual activity, banks should utilise multi-transactional analysis that enables moderators to identify ‘norms’ across payments, and consequently highlighting anything that falls outside of that bracket. Even when it is only possible to access one side of a transaction, banks still need to take responsibility in following up any peculiar activity that is identified. Monitoring strategies should include watching all transactions for unusual patterns and behaviour. This could include nicknames and code-words used for making payments, and suspicious amounts of money being moved at abnormal times or intervals.

Beyond banks, other financial institutions must also be made aware of where their responsibilities lie, and the consequences they could suffer for not complying. Forex traders, financial consultancies and advisors are also likely to have been involved in the Fifa corruption scandal, and should also seek guidance on recognising misconduct. These organisations will also have access to more than just the transaction figures, and often have records of communications with individuals and companies surrounding money transfers. Emails, telephone calls, and other forms of correspondence will hold valuable insights into the relationships and context surrounding payments, and must be monitored carefully. Advisors and legal guides must also outline the need for all suspicious requests and dubious payers/payees to be treated ‘red flags’ and followed up or reported on a case-by-case basis.

Lessons From Fifa

Many solicitors and lawyers will discover that their clients are tied up in the Fifa investigation process over the coming months. As such, all financial institutions should be advised to prepare for close scrutiny and get their houses in order.

For banks and businesses that are not involved, it should be a lesson in careful monitoring, best practice, and ensuring processes are in place for any occasion when investigatory bodies come calling. They must be advised to tighten security measures and observation strategies, making sure that any misconduct can be detected and halted, whilst simultaneously adhering to regulatory requirements and keeping their reputation clean.

Blog