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Fintelekt-ABA Webinar on A Comprehensive Approach to Financial Crime Compliance Surveillance: Key Takeaways

Fintelekt Advisory Services and the Asian Bankers Association hosted a webinar on A Comprehensive Approach to Financial Crime Compliance Surveillance on September 1, 2021.

The webinar was moderated by Shirish Pathak, Managing Director, Fintelekt Advisory Services and he was joined by Zubin Chichgar, Head – Monitoring & Analytics, Standard Chartered Bank, John Dalton, Vice President and Global Head of Financial Services Product and Services, KX, Madhu Sinha, Independent AML Compliance Professional, Former Head of AML, Citibank and CJ Mhatre, Business Head – South Asia and ASEAN, KX.

John Dalton, Vice President and Global Head of Financial Services Product and Services, KX made a presentation on what surveillance means in today’s banking world.

Surveillance is becoming more complex, more intertwined, and difficult for current systems to detect.

“The complexity of data coming into the organisation and the velocity with which it is coming, is leaving financial institutions blind to risks and opportunities.” – John Dalton

Surveillance needs to be actionable and continuous, real-time supporting micro-second decision making, deployed as a hub and spoke ecosystem and designed to be deployed across individual and multiple payment digital channels.

A surveillance system can provide the organisation with the best offense and defense strategy, combat today’s ever more sophisticated financial crime attacks, mitigate risk and identify opportunities for complete operational command and control.

The benefits of such a system are:

  • It reduces regulatory compliance cost while increasing investigation accuracy, efficiencies and fidelity
  • Stops fraud while simultaneously reducing customer friction 
  • Protects shareholder value and keeps your institution from being headline news for the wrong reasons.

Zubin Chichgar, Head – Monitoring & Analytics, Standard Chartered Bank presented next on Financial Crime Compliance Surveillance. He tracked the evolution of transaction monitoring over the years from exception reports to robust rule-based systems, to more recently behaviour-based monitoring and screening.

The definition of financial crime is changing. The FCC risk needs to be thought about in totality and beyond AML, fraud and sanction-related screening in silos.

“Digital is an enabler, but the institution needs to be able to respond fast to the speed of transactions.” – Zubin Chichgar

The challenge for financial institutions is how to keep evolving the monitoring platform and attain the true and correct view of financial crime.

Data is the most important component and if the data is not right, monitoring can become compromised. The institution needs to ensure data lineage, completeness, and accuracy.

New systems and technologies such as AI/ML or RPA are more of an aid than a complete solution, as the human dependence is very high to train the system and make it work efficiently.

Lastly the effort on model governance should not be underestimated. There is a need for expertise and a skilled team to have explainable models, maintain and defend it by independent reviews.

Madhu Sinha, Independent AML Compliance Professional, Former Head of AML, Citibank spoke on the surveillance of trade transactions.

An estimated 30% of all money laundering globally is conducted via trade. Trade-based money laundering (TBML) is the hardest to monitor due to its complexity and scale involving multiple counterparties and databases.

The current systems within banks have multiple silos for trade transaction processing and monitoring. They involve huge volumes and generate a large number of alerts. Transaction processing teams are not conversant with customer profiles. Banks often have separate solutions for trade surveillance/ monitoring which are not integrated with AML monitoring systems. There are also challenges around insufficient monitoring of trade finance clients, lack of effective systems to detect over/under invoicing and limited access to customs databases.

To effectively combat TBML, the following approach would be useful:

  1. Create a context and build a holistic view of trade relationships including customer, counterparty and transactional information
  2. Understand trade relationships with a complete trade profile of the buyer and seller. Ensure sanctions/blacklist checks.
  3. Understand the complex supply chains – what makes sense and what doesn’t
  4. Identify suspicious behaviour through the use of innovation and real-time analytics

“Banks need to reduce the dependence on manual checks, and use technology such as AI/ML to connect all the data sources available with the bank for making sense of the customer’s activities.” – Madhu Sinha

CJ Mhatre, Business Head – South Asia and ASEAN, KX covered Market Trends in Asia during his presentation.

Financial institutions globally and in large Asian centres – India, Philippines, Indonesia, etc are increasingly seeking access to real-time, micro-second decisioning to move from a historic, reactive response mode to a modern, proactive, intelligence-driven environment across all lines of business, products and services.

While investing in financial crime compliance surveillance technology, financial institutions need to ensure that the surveillance program that can quickly be deployed across individual and multiple digital channels to combat illicit trade behaviors, payments fraud, regulatory violations like money laundering, terrorist financing, and sanctions violations. It should significantly reduce regulatory compliance cost, increase investigation accuracy, efficiency and fidelity.

“The challenge for Financial institutions is to evaluate their present technologies and determine how and if those technologies can be modernized and adjusted to address the massive data onslaught and the everchanging threat environment.” – CJ Mhatre

A full-scale surveillance ecosystem offers both an offense and defense strategy can effectively combat today’s sophisticated financial crime attacks. While investing in such a system, institutions should audit their existing processes to identify gaps and challenges and review existing regulatory mandates. They should then compare the alternative technologies in the market. Cost is important but the institution should not simply consider a short-term cost of augmenting or replacing the system but rather the total cost of compliance.

A recording of the webinar is available on Fintelekt’s online learning platform Fintelekt Academy at: https://fintelekt.academy/courses/webinar-a-comprehensive-approach-to-financial-crime-compliance-surveillance/

Registration on Fintelekt Academy is free and more than 80% of the content is free to view. Visit https://fintelekt.academy/register/