previous blog post, I wrote about how many financial institutions prioritized their reputation above all other challenges as a driver in unifying their fight against financial crime – including the financial implications of crime as well as the impact of regulatory scrutiny on their customer relationships. In this post, I’ll hone in on how financial institutions are actually fighting financial crime, specifically around process efficiency and getting to the suspicious activity more efficiently.
It might surprise you to learn that at almost 70% of large institutions, investigators spend more than 30% of their time on manual processes. Even worse, at a quarter of these institutions, investigators spend more than half their time working on manual processes. Needless to say, this is a massive obstacle to compliance, fraud prevention, and risk teams’ efficiency and certainly hinders their ability to tackle financial crime effectively and consistently.
The likely reason behind this is that many banks aren’t leveraging a system to consolidate financial crime related activities and data. Our
recent survey found that 75% of large institutions worked with at least four disparate systems, and more than 25% had at least six systems in place to manage various aspects of financial crime. In my past experience, I have also worked with large global institutions that had investigators working out of
several dozen systems, making a single view of the customer all but impossible.
Centralizing alerts and investigative data allows teams to enjoy a variety of benefits – including automation, more easily identifiable insights, and of course, a
clearer path to ROI. Outside of operational and IT efficiency, investigators also become more efficient, which lowers a firm’s overall risk profile. For example,
a global bank I worked with in the past implemented a centralized case management solution on top of eight separate fraud detection systems. Not only did this investment enable them to reduce IT costs by 50%, but their false positive rate improved 50-fold.
Making these changes is obviously easier said than done, but the benefits can be staggering. According to Chartis, a research and analysis firm covering risk management technology, financial institutions are forecast to spend $31.8Bn in Risk IT, constituting a 13% year-over-year (YoY) increase. In the Tier 1 banks specifically, the increase is even more pronounced at 24% YoY. This means that while banks will have to continue to spend to run day-to-day operations, they will be looking to cut costs and make investments to help recoup this expenditure.
Seems to me that the best place to start is by giving investigators the tools they need to be smarter, faster, and still get home in time for dinner.