In the fight against fraud, money laundering, and other financial crimes, there are a number of factors that stand out as recent developments and create new challenges.
The regulatory landscape is becoming more crowded, and sectors other than finance are being increasingly affected. The situation is likely to become even more problematic and fraught, as regulators and businesses need to identify and prevent increasingly sophisticated, hidden frauds, wrapped up in big, mostly unstructured, data. At the same time, financial penalties imposed for breaches of regulations can easily exceed millions of Euros, and the reputational damage suffered as a result of a breach is immense.
In addition, the profiles of the offenders and the types of crimes they perpetrate are changing faster than regulators or companies react. Fraud has become sophisticated and harder to detect, and fraudsters now operate on a global basis, often in a virtual world and not in the countries affected.
Despite the fact that the challenges are proliferating, there are several ways of dealing with them.
First, businesses need to stay one step ahead of the criminals. All businesses understand the concept of know your customer, but it is also important to know your enemy. Compliance officers and managers have to develop an up to date understanding of the fraudster’s pathology, the types of crimes they perpetrate, and learn how to identify patterns.
Second, as the identification of fraudulent activity is almost always linked to being able to handle masses of (often unstructured) data, businesses should take advantage of an IT system that is capable of managing the process for them.
Third, rather than viewing compliance as an operational burden, management should approach it as an opportunity to demonstrate integrity to third parties. Clients today are extremely discerning, and the ability to stand out in this key area is a real advantage. This is linked closely to communication, coaching and training of management and staff.
In the next issue, Elif Morgenroth will look closely at these three ways to meet the challenge of financial crime, but first, Dr Stefanie Rummel takes a practical look what impact communication has in this field.
Effective verbal and nonverbal communication are key tools for combating financial crime
The success of a business depends largely on its public and internal profile. The ability of a business to present a positive profile, both on a daily basis and in times of crisis, such as an investigation into alleged fraudulent activity, is therefore vital. In addition, the latest recommendations from the Financial Action Task Force state that new regulations have to be communicated clearly to all employees, highlighting the importance of internal communication skills.
According to a study by the Technical University of Munich, 50% of failures to implement change within a business result from a lack of communication, and 56% are because of unclear behavior through nonverbal communication. The success of a change within a business, such as the implementation of new anti-money laundering procedures, is strongly linked to clear verbal and nonverbal communication.
It’s primarily management’s responsibility to effectively communicate with internal and external stakeholders. Unfortunately, according to a study published by Towers Watson, managers are simply not trained in these necessary skills.
Management therefore needs to be involved in developing communication strategies, and should be trained in the soft skills necessary to be able to communicate successfully with regulatory bodies, the media, shareholders, employees and other stakeholders. There is a tangible business case for this: according to the Towers Watson study, companies that train management and employees to communicate effectively outperform their peers during periods of change up to 3.5 times. There are few wins easier than this one.
Who should be trained and how?
To ensure consistent communication by the management team internally and externally is a challenge. Even if managers believe that they communicate the same ideas, it is amazing how different those ideas can actually be. Unclear, disparate visions and aims are key factors in why companies do not handle change successfully and why the media then gets plenty of ammunition for attacking otherwise successful businesses.
Simple changes to the intonation placed on words, a different way of standing or gesturing, increased eye contact, or using different terms can make a big difference. A different way of interacting and listening may totally change the meaning of what is said.
The most senior spokesperson (usually the CEO or Chairman) and the senior management team should be given individualized coaching to develop a consistent internal and external communication and interaction strategy.
Teams that are affected by stand-alone changes, such as a change in regulation, should be trained as well and when necessary to ensure developments are understood, communicated to employees and implemented in time.
All communicators should be trained in verbal, nonverbal and public speaking skills.
Role play can be a valuable way to master listening or interacting respectfully in challenging situations. Role play will also give individuals the opportunity to practice their verbal delivery to ensure that their voice and articulation are clear and that their nonverbal communication conforms with their intended effect. It will also give them an opportunity to practice their rhetorical skills, to ensure that intonation, word placement and speed of delivery are appropriate; and their listening skills, to ensure the audience feels included.
Audio, video and consultant feedback are strong tools that enable the speaker to identify problems, benchmark performance and note improvements.
It’s important that
- Management works closely with advisors to develop the communication strategy and key messages
- The spokespeople are identified and their roles and messages clearly defined
- Key messages are tailored to all the audiences they will be delivered to
- The method of communication (written statement, verbal delivery) must be identified.
After every event, lessons should be learned from the experience and taken into account for future presentations.
And finally, it is worth remembering that effective communication isn’t just verbal. Information can be disseminated in an interesting and effective way through media such as e-mail bulletins, brochures, posters and videos.
Soft skills are hard skills
Communication skills have a tangible value, as we have seen from the studies referred to above. It is wise for individuals to be advised, trained and coached in these skills, as the stakes are high both in terms of reputation and financial penalty. Valuable communication and interaction skills that facilitate compliance and help prevent crime are key accomplishments that can easily be taught and learned.