In the evolving landscape of UK finance, legal risks in financial transactions have become more pronounced. Recent developments, such as the implementation of the Economic Crime and Corporate Transparency Act 2023, have heightened corporate accountability. In other words, it is now imperative for businesses to reassess their legal frameworks to ensure compliance and minimise legal risks.
If you’re interested in learning how you can avoid legal risk in your financial transactions, keep reading this short guide.
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Strengthen internal controls and compliance frameworks
One excellent way to minimise legal risks in financial transactions is to implement preventative measures, such as establishing robust internal controls. These internal controls can take several forms, such as implementing comprehensive compliance programmes, regular audits, and clear reporting mechanisms, which can help proactively identify and address potential legal issues.
The Financial Conduct Authority (FCA) has emphasised the importance of operational resilience and governance in financial institutions.
Conduct thorough due diligence
Before entering into financial agreements, thorough due diligence is essential. This includes assessing the legal standing of counterparties, understanding the regulatory environment, and evaluating potential risks associated with the transaction.
The FCA’s focus on enhancing transparency in financial markets underscores the need for diligent assessments.
Implement effective training and awareness programs
Educating employees about legal risks and compliance requirements can significantly reduce inadvertent breaches. Regular training sessions and updates on legal obligations ensure that staff are well-informed and vigilant. As people become more aware of how certain actions can create legal or financial risks, they’re better equipped to prevent themselves and their colleagues from making potentially risky mistakes.
The Serious Fraud Office (SFO) has highlighted the importance of corporate culture in preventing financial crimes. By instilling a culture where people feel comfortable discussing issues and solutions without repercussions, your people will get better at helping each other, and consequently, the company will experience far fewer mistakes.
Seek legal advice from lawyers
Perhaps one of the best ways you can ensure you minimise any legal risks is to contact specialist lawyers. Legal professionals who specialise in financial transactions will have an in-depth understanding of the current legal limitations and can offer you expert guidance on how to navigate the issues safely.
While this process may initially seem to be more expensive than other methods, it also produces the best results. In essence, by drastically limiting the chances of you inadvertently breaking financial law, you also avoid the cost of any potential fines or other ramifications.
