Stressed by Financial Crime? Here’s Some Advice

A new report by LexisNexis on Future Financial Crime Risks (September 2017) highlights the stress felt by UK banks with respect to compliance with the Financial Crime Act. According to the report, "the financial crime professionals surveyed mentioned such terms as" confused "," tense "," confused "and" complex "when asked for their opinion on the compliance landscape. of financial crime in 2016. "

Given the rapid evolution of financial compliance rules, it is easy to understand why the 170 financial crime professionals surveyed felt overwhelmed. We asked Frank Holzenthal and Claudia Haberland of our team TONBELLER to address some of the issues raised by this investigation, from a technical and operational point of view.

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Frank Holzenthal and Claudia Haberland, FICO TONBELLER

The pressure on compliance professionals to understand and act on all existing, new and evolving regulations leaves many oversight services out of date. What can be done to alleviate the stress that they undergo?

Claudia Haberland: An important aspect to reduce the workload of compliance departments is the elimination of too many manual processes. Much of the compliance work is still done using spreadsheets, manual calendar reminders for review dates and physical shifting of records from one person to the other, with limited follow-up . This results in missed review dates, renewals of client identification documents and missing documents.

Frank Holzenthal: To solve this from a technical point of view, using a workflow management tool designed for this type of work means consistent audit trails, complete documentation, reminders and automatic follow-ups, as well as an automatic reassignment of responsibilities. sick, on vacation or changing employer. That alone does a lot to manage workloads and stress levels in compliance departments.

Uncertainty and anxiety resulting from the complexity of regulation often results in stricter compliance controls, over-reporting, and micro-management. Do you have any advice?

Claudia Haberland: When processes are unclear, workloads too high, and compliance staff trying to understand the impact of new regulations, while juggling daily workloads, they tend to want to be careful. Unfortunately, this means that instead of working as a business partner with customer service and sales, they become the business prevention unit. In times of low interest rates and increased competition from new entrants into the market, this can seriously damage the financial organization.

Frank Holzenthal: Time to market is the key today and a clear risk-based approach defined by management in cooperation with risk and compliance means that clear processes and risk criteria can be applied to new products and services. In addition, over-reporting leads to overwhelming FIUs with potential red loopholes, which waste their time and resources, and may lack real alerts. If regulatory enforcement and risk exposure are clearly defined, this tends to reduce over-reporting.

Often the frustration of compliance officers is partly a direct result of the technology inherited from the institution, which creates an obstacle to the pace of financial crime and the effective management of the cost of conformity. How do you approach issues of this magnitude, clearly outside the responsibility of the compliance department?

Claudia Haberland: While many well established financial institutions have a range of software, hardware and niche solutions (often developed on their own), it is important to be realistic here. Of course, moving to the "next generation" is always desirable, but the costs can be very high and the risks of moving components out of this complex and interdependent environment are often difficult to determine.

Frank Holzenthal: Therefore, it is important to choose a suite of solutions that has a clever architecture design, which can work with legacy applications. It should also offer the option of using the cloud and come up with generic data interfaces, which allow the organization to grow with its strategic challenges, regulatory requirements and customer requirements. It is the most reasonable, long-term, low-risk and cost-effective approach.

How can compliance officers track regulatory change and new criminal methods, which is complicated by the adoption of new products, services and channels by their organizations? How can cost and time problems be solved, both in the event of a shortage in financial institutions that are already under pressure on their profitability?

Claudia Haberland: Standardization. Much of the complexity occurs when different interpretations or requirements or compliance practices are introduced. If you look at it from a global point of view, it becomes clearer; there are minimum standards of compliance with respect to customer acceptance, transaction monitoring, compliance with penalties, and how to identify risks within your customer groups. All you need to manage are local regulations and specific to the product or service. If you take minimum requirements as a baseline for standardization, it is easier to manage a multi-site compliance program, deploy new processes and procedures, and even audit them.

Frank Holzenthal: Another important aspect is to address many compliance issues at the first line of defense, by setting up automated controls when the client or transaction enters the organization; whether physically at a branch or virtually via online banking. This frees compliance staff and workloads and speeds compliance. License models should not be determined by the number of users – in reality, the more users you have, the lower the workload.

When you talk about compliance and the fight against financial crime, you can not omit sanctions and embargoes. Some of the largest fines ever imposed result from sanctions violations. How can compliance staff ensure that a change is not missed?

Frank Holzenthal: Automation. List changes to content so frequently that they require constant attention and many lists should be monitored. To make sure you do not miss anything, you need to make sure that your AML & KYC platform has built-in connectors to reputable data providers that filter your customer base regularly and filter transactions in real time.

A new culture of increased trust between banks, regulators and law enforcement forces has allowed for greater collaboration and information sharing. How can we ensure that suspicious activity reports provide relevant information, thus reinforcing the fight against financial crime and enabling better use of resources – and do not end up being an exercise in fighting, overwhelming the FIUs? with unusable information?

Frank Holzenthal: What banks need is better integration of their transaction monitoring solution with the SAR filing component and delivery to the FIUs. Many FIUs use standard software to receive DAS, such as goAML from UNDOC . A very good AML solution, like Siron® Anti-Financial Crime Solution comes with an adapter to connect to goAML. This allows the bank to have a closed loop with the CRF.

We hear a lot about the vast amount of data collected and the sharing of information. What benefits might compliance bring?

Frank Holzenthal: Our paradigm is "Be compliant, be competitive, be successful." The more data you have to analyze for your organization, the easier it is to recognize trends in money laundering, of Fraud or Terrorist Financing.

Claudia Haberland: If you look at the consortium models, the ability to spot new connections and new trends increases dramatically. Criminals work globally, and what has been detected in one region often works in another region – unfortunately, even in the same organization. Therefore, sharing data to improve analysis and reduce risk is essential.

However, there are two challenges here: First, the data is often stored in silos. Second, there may be insufficient data quality leading to a waste disposal scenario. That is why it is important to work with expert companies with a lot of experience in data analysis, data mining and hygiene at the same time. ;analysis.


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