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Ask Me Anything: what has Napier learned during June 2020?
Julian Dixon
July 28, 2020

Each week the entire Napier team is honoured to spend a virtual hour in an ‘Ask Me Anything’ session with a heavyweight in the world of AML, compliance or enforcement.

These sessions are an amazing learning opportunity. They provide us with highly personal experiences and insights into life on the front line of fighting financial crime. And while much of what we talk about is sensitive, there are many highlights we’ve decided to share.

Last month we were delighted to talk to:

• Mark Nutall, Country Manager, Hill Associates

• Geeta Castle, Founder & Principal Consultant, Teal Blu

• Ranadip Datta, Managing Director, Protiviti

• Aaron Lee, Head of Compliance, Chynge

If there was one theme that came out of these sessions, it’s that there are a whole raft of compliance challenges to overcome. Fortunately, there are solutions to these challenges. More often than not, the solutions are grounded in technology.

Some of the biggest compliance challenges of 2020

1. Change – Now more than ever, it can be a struggle to keep abreast of all the changes our world is going through – not just for compliance officers but for the management board too. Changes in regulation and money laundering/terrorist financing tactics make it even more important to understand the business and environment, so you can anticipate change and in turn, risk. Having the right data and feeding that back from compliance and into management is really critical to making informed decisions.

2. Under resourcing – It’s very common for compliance to be highly under resourced. This makes life very difficult when you’re dependent on manual processes – and especially when working within multiple regulatory environments.

Unfortunately, it’s not possible to keep on top of all criminal activity. And this is where technology has a role, by monitoring data and alerting you to what’s going on.

However, the challenge for compliance officers is they may not have the budget or ability to find the right solution. Similarly, while the next generation of transaction monitoring tools hold huge potential, business leaders need to be educated and informed to make appropriate decisions in this space.

3. Silos – Silos are a massive issue, particularly for banks. Compliance officers often don’t have the big picture view of everything. More integration and consistency is needed to manage risk and improve compliance but this is a moving train. You can’t just stop it in order to change and fix the technology. There are also multiple challenges in implementing a single approach, including issues of privacy and consent.

4. Increasing regulatory pressure – While banks are used to complying with regulations, there are now many new industries having to face regulations for the first time.

5. Legacy technology hampering operations – Many banks in particular are working on 90s IBM mainframes. While many are not willing to rip out old architecture because of the cost, updating these systems is like patching up a car with irreparable engine damage.

Artificial intelligence searches for the unknown unknowns but when you’re using legacy technology, you won’t always know what to ask for, and therefore won’t know what information you’re missing. For example, catching someone on a sanctions list is easy but catching someone who is not on the list should be the aim.

6. Data – Data is the new oil as they say, but it can also be a mighty headache. Compliance systems need to be able to manage it effectively and store it securely.

7. Do you build or buy a transaction monitoring system? – Experiences of building a transaction monitoring system in-house have been tough and painful. Whether you build or buy will be a process fraught with considerations, including budget, the experience of the developer, functionality of the proposed system, speed of regulatory and technology change, and lots more.

It is very difficult to stay up to date and then build a platform that can not only meet today’s compliance needs, but tomorrow’s too.

While building your own system may be a short-term solution, you should consider that you may well struggle to get long-term funding to keep the system up to date with market and technological advancements.

It’s also important to bear in mind that those responsible for implementing transaction monitoring systems are staking their careers on the decisions they make. It is very hard to put a new transaction monitoring system in place, only to turn around a couple of years later and say it isn’t working.

8. Grey areas – A risk-based approach has replaced what was a very prescriptive model for regulatory compliance. While this has been necessary to help improve the fight against money laundering, it can also leave many grey areas. Sometimes you don’t even know where the grey area is. This is why having a suitable rules-based compliance system in place is important.

Unsure on how to approach your AML systems?

Contact us to speak to one of our experts, or to request a demo of our systems.

Julian has more than 20 years of financial services experience gained at major investment banks including Deutsche Bank, JP Morgan and Commerzbank. His roles have ranged from front-office sales leadership to private equity. Julian has extensive knowledge of financial services processes and technology.