Question

Why are professionals in the Banking and Finance sector concerned about employees not observing and reporting red flags in suspicious client conduct that should alert them to the possibility of money laundering or terrorist financing activities?

Answer 1

Professional in banking and financial sector are most exposed to the risk of bad asset and risk of financial contagion if there is a failure on the part of there debtors, so they need to be proactive and they need to react to any of the risk signal proactively in order to eliminate the risk associated with the bad debt .

Hence they need to recognise all such active signals in advance and they need to react onto it in order to eliminate as much as the bad assets they can so they will be left with the better quality officers on the books of accounts.

Hence, they are worried about not observing and reporting Red flag on suspicious client conduct as it would be leading to not just risk associated with their organisation on part of bad assets but it can also lead to a violation of the regulation of banking act and it can also lead to failure of banks if there is a higher amount of fraud involved and it can lead to bad reputation and contagion in the financial world.