Can you share with us how new technologies, such as big data and fast data, can be used to counter those challenges?
Compliance has often, or is still, seen as a cost of doing business that has relatively low value in terms of business or revenue generation. I think that perception is changing. There is growing appreciation here that effective compliance is a business enabler for FIs — an enabler for converting these challenges to opportunities. For example, if a culture in which compliance is everyone's responsibility is implemented within a bank, that's greater understanding of the value of the risk management function.
Optimising technology, encouraging innovation and more proactive strategic thinking, as well as investing in people and their skills can all lead to positive business outcomes. For example, an effective compliance function could potentially become a competitive advantage because you might be able to onboard clients more quickly and safely — without compromising the level of compliance - than your peers. It might also enable you to better understand the risk appetite of those customers so that you can identify additional opportunities to sell other products.
A very effective compliance programme can reduce risks across the organisation for the same reasons. By understanding your customers' profiles in more detail, you understand their appetite for certain types of products and their risk tolerance -these are very valuable assets in terms of revenue generation.
In transaction banking, good compliance has a positive impact on the efficiency of the payment infrastructure. For example, good compliance can lower the rates of payment exceptions. If a high value payment is stopped for compliance purposes, there might be real commercial pressure to release that before the payment date. Since holding that payment could negatively affect a customer relationship, improving the compliance process is needed to reduce the number of such exceptions to result in better customer relationships.
What else needs to be done to combat ML and TF?
The ongoing collaboration between FIs and legal authorities is an important one. Banks don't compete on the level of anti-fraud or AML measures. Within the financial community, there is a good and effective change of information, collaboration and co-operation and this environment needs to continue. I think what we are seeing now is a movement to break down some of the internal silos within FIs, particularly large banks. Today, different areas of risk management may be using different technologies for different processes and they each focus on specific risks. For example, the fraud team might work differently from an AML team; different lines of businesses may use different systems; and different geographies may work in different ways.
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