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Strengthening the Third Line in the Fight Against Financial Crime

The ecosystem of AFC relies heavily on auditors. In this paper we explore how to strengthen internal audit teams.

    Summary

    In recent years, there has been significant emphasis on the role that internal audit plays in ensuring that firms have robust AFC controls.  Financial institutions (FIs) have encountered many challenges on establishing an effective governance model with proper controls in place. Discover what these are and the potential of internal audit in ensuring that AFC controls remain effective.

    Key Findings

    Internal audits teams present an organization with excellent potential to test AFC controls effectively.
    However, effectiveness of the third line is a direct result of the strength of the third line.
    With appropriate training, upskilling, and planning, coupled with the right culture and tone from the top, audit teams can significantly enhance effectiveness at a fraction of the cost of conducting large remediation programs.

    Key Challenges

    • Skills and expertise of the audit function can be mixed based on the maturity of the organization. Ensuring auditors receive technical training, at least to the level of the second line, is paramount for successful and meaningful audits.
    • Organizations may inadvertently fall into several traps when it comes to financial crime audits including lack of planning, quantity of audits performed, and the timing of audits.
    • Auditors need to remain independent so they can review business processes and controls without prejudice. Often, this independence translates to an arm’s length approach.

     

    Underpinning these challenges is organizational culture. The tone from the top, incentivization, accountability play an important part in ensuring AFC audits act as effective controls.

    Who Should be Interested?

    • Internal auditors
    • Independent auditors
    • Assurance Specialists
    • Monitoring and testing teams
    • BSA/AML Officers
    • KYC/Onboarding
    • Regulators
    • Risk Manager
    • Audit Consultants

     

    Main Sectors

    • Financial Institutions
    • FinTechs
    • Independent audit firms
    • Consultancies
    • Regulated entities