Transcript:
Reputational risk is extremely important for firms to consider. In addition to client onboarding and the collection of data and information, it’s important to ensure that public domain searches are conducted and so that you’re checking media releases and news that’s been released regarding incoming business, clients, and activities. And that doesn’t just involve the entity itself that’s being onboarded, but also the entire structure so that a firm can proactively understand what business nature is involved and any reputational issues that may need to be taken into account when that client onboarding is moving forward.
When firms do not properly manage reputational risk when they’re onboarding a new client and perhaps have missed something, or they’ve onboarded an existing client and at a later point in time something comes to light, very often that can be released publicly and that can be very damaging to firms that have perhaps not actively managed that and considered the ramifications of not properly checking reputational risk of clients and the type of work that they’re doing.
Take, for example, cryptocurrencies and when there was the media attention around that issue. It became quite obvious the firms that proactively conducted checks, certain levels of robust checks regarding those activities, and others that had not. And it really shines a light on how rigorous firms are in the levels of checking that they have in place or not.
It can also have financial impacts where firms can be fined or they lose clients because they don’t have that trust in their firms, that they’re conducting the levels of checks nor being involved and the types of business that they want to be associated with.