The biggest challenge facing compliance and risk specialists today is the extraordinary scope and scale of regulatory changes, according to a survey conducted in a recent webinar run by Thomson Reuters and Napier.
Three quarters of attendees agreed that the volume and speed of new legislation was putting the sector under unprecedented pressure.
With the sanctions regime driven by the 2022 invasion of Ukraine, the rise in cyber crime (currently estimated to be worth upwards of $1 trillion), and the increase in money laundering, there is no place for complacency if compliance leaders are to successfully navigate an increasingly complex financial crime landscape.
The webinar (Preparing Your Organisation for Increased Financial Crime Compliance Management), moderated by Nathan Lynch, Thomson Reuter’s financial crime specialist for Asia and Emerging Markets, aimed to examine how risk and compliance functions can not only keep up with the deluge of legislative changes in these extraordinary times, but also to highlight their crucial contributions to an organisation’s bottom line.
When financial institutions struggle to implement change at the same rate as legislation, compliance functions and the company as a whole can face criticism for failing to keep up. This can, in turn, feed into recruitment issues for compliance roles.
The panel included:
- Mark Nuttall, Solutions Director at Thomson Reuters
- Robin Lee, Head of APAC at Napier
- Jamil Ahmed, Chief Compliance Officer at HSBC Singapore
- Victor Pineiro, Managing Director, APAC at Confirmation
A measured approach to compliance and access to process are needed
The panel agreed that for businesses to prioritise the management of regulatory change effectively, there needs to be a considered compliance process in place which encompasses pre-planning and sufficient allocation of resources and funding.
“Organisations must distil and prioritise based on the significance and degree of risk posed by regulatory changes. Some are profound and require more process, whereas others are benign and need a quick gap analysis before they’re closed off,” said HSBC’s Jamil Ahmed.
With ninety per cent of all data having been created in just the last three years, the need for data accuracy and sufficient storage and processing power has never been more pronounced. The move from siloed information to a holistic overview of data is necessary to give organisations a 360 degree view of their data sets, enable perpetual KYC, and reduce time-consuming false positives in data monitoring.
Robin Lee explained that this is exactly what alerted Napier to the need to develop “an integrated big data financial crime risk management platform which brings all the information and applications together to give clients access to these game changing features.”
How best to manage the data you have
Data stewardship was identified as a major challenge for the sector by attendees, with businesses being asked to manage multiple sources of data. Data analytics tools are evolving rapidly, and with the introduction of SupTech (supervisory technology), there’s a move toward regulators having access to greater data sets and more power to challenge banks and financial services providers with their own analytics.
For compliance specialists to get ahead of the curve, they need to enhance controls so that they can focus on the issues that are leaving their organisations most vulnerable. For example, the demand for a frictionless financial services environment has left traditional frameworks struggling to keep pace with the ingenuity of fraudsters.
The panel commented on the huge variety in risk landscapes, with some organisations failing to understand their supply chains. They observed that start-ups were more likely to have limited or no risk management systems in place.
Technology can be both the cause and the solution to financial crime risk
Pre-empting large scale fraud is difficult, but the application of state-of-the-art technologies like AI is transforming how data can be used. The development of entity extraction - the ability to distinguish between contexts - can give clearer indications of fraudulent or suspected terrorist activity. As the use of public sources to identify faces and tools for video and voice recognition come on stream, AI is becoming an essential tool.
A new money laundering and terrorist threat emerging as people’s lives and livelihoods move from the real world to a variety of metaverses, is meta crime, which, with no central point of jurisdiction can only be effectively mitigated with integrated financial crime datasets.
The drive to ESG (Environmental Social and Governance) adds another layer of complexity as cascading global regulations fail to recognise cultural and organisational drivers. Businesses need to understand the deep and far-reaching impact of these changes on their organisational footprint as well as their supply chain.
Future challenges for the compliance sector
In the future, global trends such as recession or civil unrest may require additional, stricter regulatory action from governments. Never before has access to the internet been so widespread and so many fraud opportunities open to criminal minds. The future proofing of compliance and risk operations rest in their ability to adapt and be agile.
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