Banks must exploit synergies between anti-fraud and anti-money laundering

(PresseBox) ( London, )
The increasing amount of overlap and duplication of data, tasks and processes in their anti-fraud and anti-money laundering (AML) divisions is driving banks to seek synergies between compliance, risk management and security reveals a new report by independent market analysis firm Datamonitor. The report "Using Technology to Combat Financial Crime in Retail Banking", says the current economic crisis exacerbates existing problemswhich may result in the industry seeing a new wave of financial mis-statements, account manipulations or internal fraud. Reduced vigilance could open new windows of opportunity for money launderers and fraudsters.

"Financial crime is no longer simply about the laundering or theft of money. It is about high profile issues such as customer data theft, financial misreporting, and many others", says Jaroslaw Knapik, financial services technology analyst at Datamonitor and the report's author. "The extremely severe conditions within the global financial services industry are likely to increase the risk of potential internal and external fraud attempts. Furthermore, cost-cutting pressures may affect AML/anti-fraud departments, among others. Indeed, some banks have already announced budget and staff reductions."

Banks are moving from a reactive to an intelligence-based, proactive approach

The growing adoption of a risk-based approach to counter financial crime issues is driving the implementation of advanced deviation detection and risk measurement techniques through the use of technology. To date, the major focus has been on automation of existing methods and business processes.

However, these days the focus has shifted towards accuracy. Of 194 banks surveyed globally, 64% indicated that currently the top investment priority is technology that provides effective monitoring and detection capabilities with high alert accuracy. All these factors enable banks to move from a reactive stance to a more proactive approach by focusing human resources to deal with the highest risk cases.

Growing costs are driving increased standardization of business processes

Since the emergence of the first significant wave of financial crime detection and prevention programs, costs have far exceeded expectations. Besides the technology expenditure, the total cost of experienced technical and non-technical compliance and anti-fraud experts has significantly increased. The cost is quite often spread over many different business functions, such as operations, compliance, risk and security. It may also overlap with processes that are embedded in regular business practices, such as payment processing or credit risk analysis.

As such, banks may be unable to hold a single unified view of all the associated costs related to anti-money laundering or anti-fraud activities, preventing them from making efficient decisions regarding how best to direct their resources to focus on the major areas at risk of financial crime.

As financial crime grows, there is anecdotal evidence that banks are increasingly combining their compliance, fraud, and security departments into one single unit to take care of similar risk areas. Datamonitor expects this approach will result in an emerging trend of standardizing business processes and technologies to create an enterprise-wide view of compliance and fraud risk within an institution or across business lines, which can be viewed on management dashboards to keep track of various risks across the enterprise.

Knapik concludes:

"There is a growing opportunity for business and technology consultants or vendors that can improve a bank's understanding of the full range of anti-financial crime related processes which exist across the entire organization, and further implement all the necessary enhancements to the existing process. However, with the purchaser's greatest concern being the ability to acquire a solution that provides high alert accuracy, technology vendors need to focus on providing numeric proof (or if possible benchmarking studies) to their potential clients which demonstrate the reliability of their solutions."
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