Recent history is already littered with a slew of global scandals hinging on failures by institutions to effectively get to grips with precisely who they are transacting with. The resulting fines and levies have prompted vows from banks to tackle the problem head-on and ensure they have suitable Know Your Customer (KYC) programmes in place.
But the clock is ticking. Having put conduct risk and corporate governance in the spotlight with high profile probes into PPI and rate-rigging, the regulators are now set to turn their attention to breaches of anti-money laundering (AML) regulations.
So far attention has been concentrated on the big names, but in all likelihood the focus of investigations into suspected AML breaches is set to be extended into smaller firms, be they loans outlets, credit cards companies, or short term lenders. It also means it is now an opportune time to revisit back-office processes, particularly those linked to customer acquisition, retention, their lifecycle and related analysis into any on-going checks on long-term and historic portfolios.
The frequency of account analysis, mortality checks, routine reviews of sanctions lists and politically exposed persons – so-called PEPs – are all now critical to help ensure compliance, because from here on, AML and KYC has to be underpinned by a combination of vigilance and due-diligence.
For many institutions, the risk of six or even seven-figure fines now far outweighs the relatively modest burden of timely portfolio and back-book reviews.
In all likelihood the complexity of our evolving global monetary system will only be matched by fraudsters, criminals and terrorists’ determination to exploit every loophole they can – especially if it comes at the expense of a momentary lapse from a bank, which risks enormous financial, reputational and shareholder damage.
But thanks to our new digital world, all transactions – however seemingly insignificant – now leave an electronic footprint and virtual bread-crumb trail that leaves a trace, which with the right level of analysis enable the ability to link, detect, identify, understand, investigate and disrupt potential threats.
Of course developing a capability to quickly transform complex volumes of seemingly random data sets into high-quality, actionable intelligence is a specialist skill and not something that may be readily or immediately available among many institutions’ back-offices.
But with the help of applied analytics, huge amounts of data can be studied to understand, predict and get one step ahead of suspect behaviour. Add to that layered security, the analysis of suspicious transaction networks and parties, and fraud teams are back on the front foot.
Modern day anti-fraud tools aren’t simply about the hugely over used cliché of ‘big data’, they’re all about ‘big analytics’ and clearly the more data sets you have to analyse the sharper the decision-making will be.