Evolving Financial Process Ahead of the Trending Crimes

In the wake of the 21st century, there has been a single constant in the global business environment – “Disruption”. As crimes in the financial industry become more organized and sophisticated, companies need to constantly evolve and stay ahead of the curve. Regulators have a broader spectrum, as the risk transcends beyond a single financial institution and covers national interest.

In such a time of peril, a company needs to fortify itself internally. This can be accomplished by focusing on three critical aspects:

  • Risk Management: Planning is the first step and it should ensure that the category of risk falling under “unknown” is bare minimum. While there are different methods and models to assess risk; domain led expertise has to be at the core.   
  • Preemptive Cultural Change: The culture within the organization determines how individuals would react in a certain situation, in turn their willingness to go that extra mile is also established. While this is a top-down approach, the impact is maximized by the frontline staff.
  • Being Agile: It may not be possible to reduce ‘unknown risk’ all the time, as new levels of sophistication are being attained by criminals within the financial system. Introducing agility within the banking and financial space is the only long-term logical recourse.

What are the areas a financial institution needs to focus on to evade the disruption caused by financial crime?

In my opinion, reducing compliance cost is a very myopic outlook. The objective should be to focus on long term value extraction where the compliance function is an enabler to growth and does not create constraints. It can be achieved through effective management of three aspects:  

  • Banks and financial institutions need to address the threat: Risk is proportional and would changes as it is specific to each company. While the broad guidelines remain the same, the customer base, location/ region of operation, regulatory jurisdiction and product in offering are just a few examples that can alter risk parameters. A company needs to be cognizant of all the facts before initiating the resolutions to address associated threats. 
  • Implementing appropriate monitoring system: It is quintessential that the watchlist database is wholistic in its nature and the solution in between is not creating any kind of conflict (as it interacts with customer database). The biggest threat that looms is “False negative” and even a single miss can cause irreparable damage.   
  • Domain led specialists: We know that human factor is the key and appropriate investment in specialists is critical. Not just with in the domain (AML/ Fraud) but also other associated (IT) specialists are important. This will form the foundation and the basis on which an organization will not only be able to detect but would also prevent a majority of financial crimes directed towards it. 

To conclude, financial companies have a constant need to evolve and keep up with the changing dynamics in the market. Adhering to regulatory requirements is essential without impacting customer experience. While the path maybe full of uncertainty, the only way to succeed is by being compliant.

About the Author
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Anuj Khurana

Global Head of Banking

[email protected]

/ Anuj Khurana