Last week we published our "UK white-collar crime enforcement predictions for 2019". This week, it is the turn of financial crime compliance.
1) The first 'monitorship' in the UK
It may be something of a bold prediction given that no English Deferred Prosecution Agreements ("DPAs") were entered into in 2018 and that monitorships have not always proven popular. However, we consider the appointment of the first English monitor of a DPA more likely than not in 2019. Such an appointment has been made more likely by heightened interest at the Serious Fraud Office ("SFO") in the adequate procedures associated with s7 of the Bribery Act 2010, a commitment to faster resolutions of cases by SFO Director Lisa Osofsky and a number of 'monitorship like' projects in 2017 and 2018, such as the review of Lord Gold at Rolls-Royce Plc.
We also note the continued use of monitorships in the US (if to a lesser degree than previously), despite lingering concerns relating to costs and business disruption sometimes associated with them. In addition, there has always been scope under the relevant English legislation and guidance to appoint monitors in a limited, focused and cost-controlled way and within the confines of the additional court oversight built into the DPA process.
2) Adoption of semi-automated third party management systems
2018 saw significantly increased interest in enhanced third party management systems from large UK corporates across a number of sectors, including retail, insurance, engineering, defence, telecoms and pharmaceuticals. This trend seems highly likely to continue in 2019, aided by experts in the legal requirements for the systems and specialist technology providers.
Typically the aims of companies that adopt enhanced third party management systems will be both to reduce many forms of regulatory risk and meet ever higher expectations of enforcement agencies. This is accomplished, at least in part, by implementing risk based (and semi-automated) third party review workflows combined with built-in screening tools that make use of both machine learning and natural language processing.
3) ISO 37001 will gain greater acceptance in the UK
The UK market has been wary of rushing to adopt the corruption focused ISO 37001, for reasons including the robustness of programmes already compliant with the UK Bribery Act and concerns regarding the accreditation process. However, the combination of companies like Alstom, ENI and Mabey becoming certified, the existence of accredited entities now actively marketing their certification services in the UK, and an increase in awareness of the ISO standard in supply-chains seems likely to result in many more UK accreditations in 2019.
Leading UK companies often have long supply chains, and the adoption of the ISO 37001 standard by even a few of those companies could encourage many of their suppliers to follow suit. We also anticipate that a number of entities operating in higher-risk environments will pre-emptively seek accreditation to help demonstrate compliance to ever more risk-averse lenders.
4) A focus on Management Information
Much more compliance data is being created and collected than ever before and Boards increasingly expect their compliance departments to be as comfortable with projections and measures of operational effectiveness as any other part of management. This trend is likely to continue in 2019 and to be re-enforced by UK regulators and prosecutors, including the FCA, which paid more attention to this area in 2018 than in any previous year. In addition, some entities will seek to merge their management information metrics with the metrics used during periodic risk assessment. This will facilitate the continual measuring of risk and help to assess the impact of newly implemented compliance controls and training.