International Moral Hazard Risks Management in Monetary Institutions
Keywords:moral hazard risks, operational risks, cyber security risks, digital risks, Anti Money Laundering, know your costumer, compliance, reputational risks
This study examines moral hazard risk and its impacts on the global monetary industry. While most risks can be attributable to natural causes, moral hazard risks are mainly due to failure of human value systems. The fines which have been imposed on financial institutions have been highlighted by regions, for ease of reference. Measures such as standard operating procedures, robust systems and competent staff together with anti-money laundering (AML) and know your customer (KYC) policies can help control and can prevent, or at least minimise, sanctions and fines. In the case of money laundering, consequences can be severe as it not only destroys local economies but also affects the host economies¬ by financing illegal and terrorism related activities. To prevent AML activities, regulators need to be more aware and stringent in policy implementation Fines and sanctions imposed on financial institutions and the growing nature of such fines and sanctions indicate the severity of this problem in recent times. One way to prevent and/or to reduce this risk is through moral and religious education coupled with adequate regulatory policies, controls and procedures. The implementation of these regulatory policies have to be then monitored and the necessary actions taken to review and enhance them to manage and mitigate any the risks.