Infiltrators and enablers in key positions within banks and other financial institutions pose a very real problem. Maintaining effective control is difficult for both practical and legal reasons, but it is a challenge that must be addressed, says Viveka Strangert, one of the Sweden’s most experienced advisors on anti-money laundering (AML) and corporate governance.
As society's efforts to combat money laundering intensify, criminals are increasingly trying to bypass control mechanisms. Having someone on the inside of an organization who can share knowledge about internal controls and inform about new procedures holds great value. This value increases even more if an employee can be influenced to grant benefits such as permits, credits, or approve transactions that should have been halted.
– There are many in the financial industry fighting against the threat posed by infiltrators and enablers, especially when there is a lack of tools to conduct follow-up background checks due to labor laws, GDPR, and other regulations. Background checks can be done at the time of hiring, but how do you tackle the problem of current employees who are approached and manipulated? It’s incredibly difficult, says Viveka Strangert.
She shares the perspective presented in the Swedish National Council for Crime Prevention's report "Enablers of Criminal Networks" published earlier this year. Several interviewees in the report express uncertainty about which controls can be applied to employees and for which positions.
However, many also argue that simpler background checks and "an overly register-based assessment" are often insufficient.
– Conducting these checks is essentially very reactive. By the time you check if someone has been convicted, it's already too late. What may be more important is to understand a person’s vulnerabilities and motivations earlier. Very few people are malicious or consciously engage in criminality. Rather, there may be a naivety about the risks.
Soft Values as Important Protection
Viveka Strangert notes that the issue is complex. Different interests, such as the protection of employee privacy and the organization's and society’s need to protect themselves against criminality, must be balanced.
The lack of simple solutions increases the importance of softer values. It is about creating an internal culture where professional pride and transparency are highlighted as role models, she emphasizes. Conducting interviews and regular employee discussions is another way to mitigate risks. Furthermore, ensuring that there are trustworthy communication channels between different parts of the organization, especially the board, is crucial.
One challenge is that the business side and internal control functions are not always well-aligned. For example, if business performance is only measured by revenue and profitability, risks may not be given as much importance when approving a new customer.
New Board Role at Alecta
Viveka Strangert has a legal background with extensive experience in corporate governance, compliance, and anti-money laundering work at companies such as Skandia, Swedbank, and KPMG. In recent years, she has run her own advisory practice and holds several board positions, primarily in the financial sector, including at Alecta and Ikano Bank.
She enjoys having one foot in the practical day-to-day operations of various companies and one in the boardroom. She seeks assignments where her special expertise is in demand, often as an advisor and mentor to compliance officers or to strengthen a board's competence in compliance and anti-money laundering practices.
– When I raise my voice on money laundering issues, people tend to listen, she notes.
At Swedbank, this led to her departure as head of compliance after a widely-discussed presentation to the board in the spring of 2016. However, she dismisses the notion that she was some kind of whistleblower.
– I didn’t feel brave or anything like that. It was just another day at the office for me.
Increased Demands on Boards and CEOs
The broad portfolio of assignments she has built up in recent years means that she herself has undergone various background checks, including the specific management assessments carried out by the Swedish Financial Supervisory Authority. She sees this as natural and stresses the importance of transparency, such as clearly declaring potential conflicts of interest upfront. However, she acknowledges that the assessments are not foolproof, particularly since key positions like compliance officers are not scrutinized by the FSA.
The growing demands on board members and executives in financial companies, such as banks, represent a long-term trend that shows no signs of weakening. The days when board members could come unprepared to meetings are long gone. And being a board member at a bank differs significantly from more traditional companies
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– A director with experience only in non-regulated industries may struggle to grasp the broader responsibilities that go beyond just the Companies Act. In a typical company, the board is ultimately responsible for the results and accuracy of the financial reporting. If the CEO delivers poor results, you simply appoint a new one. But in a financial institution, the board has much more operational responsibility. It must monitor various risks, ensure capital adequacy, and oversee compliance.
The Swedish corporate governance model also places increasing personal responsibility on CEOs, particularly in the area of money laundering. The new EU regulation that is now being implemented in Sweden takes inspiration from the model in countries like Germany. In those countries, there is a level of senior executives, alongside the CEO, who can bear personal responsibility, such as the compliance officer. In Sweden, this responsibility will likely fall on the CEO, based on how the Companies Act is structured.
– The Swedish Companies Act is different for historical reasons, and it has worked well until recently, when so many regulations based on EU law emerged. In Sweden, only the CEO among senior executives can bear this personal responsibility. I don’t know how this will be resolved, but it’s a problem as the burden of responsibility continues to grow.
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