Recent articles on ING agreeing to pay a >$619-million fine and HSBC facing over $1-billion fine have put anti-money laundering and compliance back into the limelight. These fines are mind bogging in size and reflect that although millions have been spent on technology in this area, they’re not fixing the problem.
What Are the Problems?
- Ever-increasing compliance data is becoming a big data problem, requiring new approaches to sift through the information and the erroneous activity
- Latency must be replaced with more real-time alerts. It does no good to know that the bank processed an unusual payment to the Cayman Islands yesterday. Action is needed as the process happens to divert it and trigger an investigation.
- Black-box compliance applications need to become self-learning in style and nature. What are the characteristics of unusual payments or suspicious individuals? Can using the latest predictive technologies detect over time the patterns, markers, and styles not visible or computable by the human eye, thus improving the process?
After recent experiences, regulators will increasingly look at the technology used to make sure banks are truly identifying these transactions whether originated inside the banks or across their payment network.
What Does Next-Generation Look Like?
- Provide a technology platform that’s scalable as requirements become more granular
- More real-time ability to pick up transactions as they happen to alert, stop, and investigate before processing
- Analyze all payments passing through the bank’s network by correspondent banks using continual monitoring
- Implement a thorough process that may in the beginning deliver too many false positives to investigate but uses technology that learns and improves based on past experience, continually optimizing results
- Employ an easy-to-use interface that allows regulators or users to file suspicious reports by electronic means, such as XBRL
Investments continue to rise in this area due to the severe reputation damage that banks sustain, as witnessed by recent HSBC’s and Barclays’s recent experiences.
What do you think is the best way to move forward?