Mirela Ciobanu & Dina-Perla Portnaar
Almost everyone agrees that 2020 has been a rough year. However, 2021 has not smoothed some of its roughness. Most of us continue working from home, having to balance family life with professional activities, dealing with a high degree of anxiety due to uncertainty of what is going to happen next. However, being able to take part in virtual events has helped us to stray in touch with our peers, to maintain a high level of engagement with our industries and to learn more about the topics that we are interested in – in this case how to fight financial crime and find the right business partner to assist your deal with financial crime from a compliance perspective.
At least, last year has taught us some valuable lessons. We are stronger in fighting negative actions when we cooperate and share informationabout us or about our organization within our group. People, thus operations teams, compliance officers and employees in general, are more open to digital transformation and are more tech-savvy than ever before COVID-19.
Main trends in 2020
2020 also meant an increase in cybercrime activitities. Also, AML and fincrime leaders, among them Rachel Sloan, Global Head of AML Programs State Street, have spotted several other trends such as:
– Increased market manipulation in industries such as trading, health industries and greatly impacted disciplines by the environment created by COVID-19;
– Fraud related to stimulus packages. To stop these negative actors, experts suggest to put (better) controls on how funds are distributed;
– Surge in digital attacks caused by opportunistic fraudsters.
Transaction Monitoring Netherlands
The shift in the payment methods used by consumers, from cash to digital, has demanded organizations to adjust their money laundering detection strategy, to see what the new behaviours mean. Markus E. Schulz, Deputy Global Head FCC & Global Head Change Management ING agrees that “like organizations, we need to be vigilant and see the new normal, even if COVID-19 brought new risks. We have to distinguish what is problematic behaviour, as not everything is a crime.”
To distinguish between the good and the bad guys, businesses need to have access to data. The information needs to be available, reliable and connected. Some organizations can build a rich picture of a client and draw a risk score, by source mining, analyzing, using AI and gathering data from social media and so on. Organizations need to access quality data, thus the right information, to avoid noise.
The audience stressed the importance of data in fighting crime, and the TMNL initiative was mentioned. TMNL stands for Transaction Monitoring Netherlands. TMNL is a joint initiative of five Dutch banks, namely ABN Amro, ING, Rabobank, Triodos Bank, and De Volksbank. With TMNL, these banks will collectively monitor their payment transactions to look for signals that could indicate money laundering or the financing of terrorism.
Organized network of companies and individuals
Traditional methods and legacy technologies are sometimes unable to cope with the huge increase in global transactions. This leaves data in silos between systems and departments. To help financial institutions and compliance teams to eliminate silos, reduce false positives and gain a more holistic view of customer behavior, Luca Primerano, Chief AI Officer at Napier discusses how can AI enables AML compliance teams, to face some of these challenges and meet regulatory requirements.
As financial crime becomes overly complex, there is never only one individual behind a financial crime scheme, but an organized network of companies and individuals, Marius-Cristian Frunza, Founder, Schwarzthal Tech says. The current KYC processes are not able to assess criminal networks. For example, a simple process would not have the capacity to check whether a company’s previous director is disqualified from another jurisdiction, or whether an Ultimate Beneficial Owner (UBO) is related to a sanctioned individual.
Periodic KYC versus dynamic KYC processes : KYC is mono-dimensional, static, and backward-looking. However, an efficient screen tool should provide a fully-fledged picture of a client with the kinbks of the connected parties. Therefore, a paradigm shift is necessary to improve the concept of KYC, with a dynamic, multi-dimensional and forward-looking concept, aiming to explore the network behind a customer.
To reach this goal, financial institutions could tap into tools such as AI and NLP, to collect, visualize and quality the information about the network and the underlying risk of a client.
Threat from the inside
Most of the time, we talk about negative actors coming from outside, but the threat can come also from inside as well, Erkin Adylov, Chief Executive Officer and Founder, Behavox suggests. Security or compliance challenges can come from the way employees use emails and internal chats, especially during the COVID-19 pandemics.
The company advises businesses to decide on and create data points risk. “The tools we have now are antiquated for large volumes of data, as data is now created at high velocity. Because of that, compliance teams are struggling”, Erkin mentions.
The right Reg(Tech) partner
The audience is curious to learn how to make sure that the collaborate with the right RegTech partner and tech provider to boost the strategies. Some tips provided by the experts include :
– Strong partnerships : banks and technology vendors need to stay constantly in touch, discuss what the bank’s real need is and how the tech vendor can help to solve that. Still, some say that there are many cases in which banks want to see how the product behaves. Or banks are reticent to take a step forward, as everyone promotes a quick use. In the end, it takes a lot of hardware and resources. Or banks don’t necessarily know what they want. Consulting with them is important, thus earning their trust.
– Adding value to compliance : the compliance team or tasks should not be seen too much as a compliance center, but a value-adding component.
– As there is a strong network of compliance officers, business comes from referrals.
Even if we couldn’t attend all the sessions, joining some of the discussions helped to understand that data is a valuable tool to gain a more holistic view of customer behavior. Compliance teams have started to play an important role within the organizations. We want to thank the AML and FinCrime Tech Forum virtual team for inviting us and setting up an insightful event.
