Survey: U.S. Banks Lag Behind Canadian, U.K. Counterparts in Race to Merge Fraud, Financial Crime Operations
A survey of banks in 10 countries finds that U.S. banks lag behind global counterparts in integrating functions
Fraud Protection & Compliance
SAN JOSE, CA. – September 11, 2019 —
Highlights:
- Only one quarter of retail banks have adopted an integrated approach to financial crime systems, but active collaboration between functions is now the norm
- Two-thirds of banks take a strategic approach to integration, driven by detection and scalability benefits, in addition to cost synergies
- 72% of banks are looking to get integration synergies and the majority are seeking to do so within three years
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, with the U.K. leading the pack.
Responses show that U.S. systems are less integrated than Canada's – only 25 percent of U.S. banks have a common reporting line for both fraud and compliance, versus 60 percent for Canada.
More information: https://www.fico.com/en/latest-thinking/ebook/usa-banking-survey-2019
The survey also found that 72% of U.S. banks surveyed have strategic plans for further integration. Worldwide, 71% of banks across the regions surveyed have integration strategies, to either fully integrate functions or share resources where synergies exist with the U.K. leading the way, followed closely by the U.S.
These goals are driven by considerations both financial and strategic: Since the 2008 financial crisis, regulatory fines for the global banking industry for compliance breaches related to compliance or sanctions failures now total more than $28 billion (all figures USD), with some single fines 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 TJ Horan, vice president of fraud solutions at FICO. “U.S. banks are all too familiar with the challenges presented by a disconnected approach, but struggle to manage high workload volumes and ensure detection rates are high.”
Though the world’s banks appear united in their pursuit of integration, FICO’s survey found significant differences between approaches among the ten countries studied.
Top pain points in meeting financial crime compliance objectives
| Rank | U.S. | Rest of the World |
| 1 | 45%: Ensuring detection rates are high | 42%: High levels of false positives |
| 2 | 42%: Managing increasing levels of alerts | 38%: Ensuring detection rates are high |
| 3 | 36% (tie): Disconnected approach to managing financial crime; Managing high workload volumes due to defensive approach (e.g. SAR filings) | 35% (tie): Managing high workload volumes due to defensive approach (e.g. SAR filings); Speed in responding to new financial crime threats |
Main technology-related challenges for anti-financial crime
| Rank | U.S. | Rest of World |
| 1 | 48% (tie): Performance of technology platforms; Cost of technology systems | 47%: Performance of technology platforms |
| 2 | 39%: Use of multiple systems across operational processes | 43%: Use of multiple systems across operational processes |
| 3 | 38%: Low integration between technology systems | 38% (tie): Speed to change technology systems; Ability to support management reporting |
Current level of integration between fraud and financial crime compliance functions
| Rank |
U.S. |
U.K. | All Respondents |
| 1 | Data: 27% very integrated | Investigation systems – 53% very integrated | Data: 29% very integrated |
| 2 | Investigation systems: 24% very integrated (tie) | Detection systems – 35% very integrated | Investigation systems: 28% very integrated |
| 3 | Controls: 24% very integrated (tie) | Controls – 25% very integrated | Controls: 25% very integrated |
U.S. banks reported lower levels of integration than their U.K. counterparts in six out of seven areas. Even at their highest levels of integration, data and investigation systems, just over half of U.K. banks said their fraud and financial crime compliance systems were very integrated. Worldwide, it’s clear the banking industry has only started the process of bringing these functions closer together.
Ambitions for integration between fraud and AML compliance functions
| Goal | U.S. | U.K. | All |
| Strategic plan to fully integrate functions | 24% | 47% | 29% |
| Strategic plans to share resources where synergies exist | 48% | 35% | 42% |
|
Tactical approach to sharing resources where synergies exist, with active drive for this |
12% | 12% | 15% |
| Tactical approach to sharing resources where synergies exist, but no active drive for this | 15% | 6% | 11% |
|
No plans for integration |
0% | 0% | 3% |
Most respondents received high marks when it came to strategic planning, with most having strategic plans to either fully integrate their functions or share resources where synergies exist.
“Convergence is a hot trend in the fraud and financial crime compliance space,” Horan said. “Overall, our survey shows that banks are moving in this direction, though the U.S. is further behind 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. In addition to the U.S., Canada, and the U.K., respondents came from South Africa, Scandinavia, Germany, and Austria.
About FICO
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About Ovum
Ovum is a market-leading data, research, and consulting business focused on helping digital service providers, technology companies, and enterprise decision-makers thrive in the connected digital economy.
Through our 150 analysts worldwide, we offer expert analysis and strategic insight across the IT, telecoms, and media industries.
We create business advantage for our customers by providing actionable insight to support business planning, product development, and go-to-market initiatives.
Our unique combination of authoritative data, market analysis, and vertical industry expertise is designed to empower decision-making, helping our clients to profit from new technologies and capitalize on evolving business models.
Ovum is part of Informa Tech, a B2B information services business serving the technology, media, and telecoms sector. The Informa group is listed on the London Stock Exchange. Find out more via: ovum.informa.com
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Greg Jawski for FICO
Email: greg.jawski@porternovelli.com
Phone: +1 212-601-8248
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