Fraud Protection & Compliance
LONDON – 11 September 2019 —
A new independent survey by research firm Ovum on behalf of global analytic software firm FICO has found that most banks plan to integrate their fraud and financial crime compliance systems and activities, in response to new criminal threats and punishing fines. Responses show that UK banks are more advanced in their progress and ambitions than most countries surveyed.
The survey found that two thirds of banks across the regions surveyed have strategic plans for further integration, either to fully integrate functions or share resources where synergies exist. A further 20% are actively seeking to obtain synergies even if they are only taking a tactical approach.
Since the financial crisis, regulatory fines for the global banking industry for compliance breaches related to AML or sanctions failures now total more than $28 billion. Some single fines have been as high as $8.9 billion. However, this regulatory ‘stick’ is only one driver for banks to tackle financial crime — banks also wish to protect their customers and themselves.
“Banks are asking a fundamental question: Is the current approach to tackling financial crime sustainable or should they seek a more integrated approach between fraud and anti-money laundering (AML) compliance?” said Matt Cox, who oversees fraud, compliance and cybersecurity solutions for FICO.
However, FICO’s survey found major differences between approaches in the UK and the nine other countries studied.
Top pain points in meeting financial crime compliance objectives
|Priorities||U.K.||Rest of the World|
|1||Managing high workload volumes due to defensive approach (e.g. SAR filings) – 47%||Ensuring detection rates are high – 41%|
|2||High levels of false positives – 47%||Speed in responding to new financial crime threats – 36%|
|3||Ensuring detection rates are high – 35%||High levels of false positives – 35%|
“Ensuring high detection creates major operational challenges in the subsequent operational workloads,” Cox remarked. “Particularly in Europe (as well as South Africa), institutions struggle to manage high levels of false positives (suspected fraud or money laundering that is not). In the UK, the overall volumes of suspicious activity reports or SARs that require investigation poses the biggest challenge.”
Main technology-related challenges for anti-financial crime
|Priorities||U.K.||Rest of World|
|1||Performance of technology platforms – 53%||Performance of technology platforms – 46%|
|2||Use of multiple systems across operational processes – 35%||Use of multiple systems across operational processes – 43%|
|3||Speed to change technology systems – 35%||Cost of technology systems – 39%|
“Performance is the key driver in the UK and other countries,” said Cox. “Similarly, banks in all regions are frustrated by the number of systems they need to use.”
Current level of integration between fraud and financial crime compliance functions
|Top Areas||U.K.||Rest of World|
|1||Investigation systems – 53% very integrated||Data – 30% very integrated|
|2||Detection systems – 35% very integrated||Controls – 25% very integrated|
|3||Controls – 25% very integrated||Investigation systems – 24% very integrated|
“UK banks reported higher levels of integration in six out of seven areas,” said Cox. “That said, even in the area with the highest level of integration — investigation systems — only just over half of UK banks said their fraud and financial crime compliance systems were very integrated. We are still at the start of the process of bringing these functions closer together.”
Ambitions for integration between fraud and AML compliance functions
While the majority of banks across all regions have strategic plans for convergence, nearly half of UK banks reported a strategic plan to fully integrate functions, compared to 26 percent of all other banks.
“Convergence is a hot trend in the fraud and financial crime compliance space,” Cox said. “Overall, our survey shows that banks are moving in this direction, though the UK is further along than most countries surveyed.”
Ovum surveyed over 100 retail banks on their priorities, challenges, and plans for financial crime, looking to assess the maturity of the sector in tackling financial crime, and ambitions towards integration. Respondents came from the UK, the US, Canada, South Africa, the Nordics, Germany and Austria.
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 195 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time. Learn more at http://www.fico.com
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Emily Broadbent for FICO
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