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Financial crime needs a transformation – why and how?

Financial Crime technology

Thought piece by Insync CEO, Sean Coady and Risk Consulting Senior Manager, Ronald Daliya.

When I think about financial crime, I reflect that the only thing that has certainly changed over my 30 years plus journey is technology. People are still people, both good and bad. Greed is still a powerful force, but technology has single-handedly made the game both easier and harder.

It is much easier to scale, to be anonymous, to conceal and possibly even deceive too. It is also easier to detect the needle in the haystack, the outlier clue, the non-conforming behaviour.

Technology is driving the need for transformation

What is most obvious to me is the need to integrate financial crime capability into mainstream business process and management. Treating fraud risk, AML, bribery and corruption, or even extortion (via ransomware) as discrete risks to be managed in isolated teams or systems just does not cut it.

It turns out to be expensive, confusing and in the end ineffective in providing the kind of protection an organisation needs – both around the dollar losses you can incur, but more significantly, around the reputation harm that can ensue from ineffective approaches.

Most boards and C-suites have little direct experience working in and around financial crime – it has been a niche sector for decades. While they all understand the role and power of technology supporting digital business transformations and the rewiring of, well almost everything, they may not think about, or know how to approach, the kind of business transformation that is needed across financial crime.

Where to begin on the change journey?

The starting point for this journey is reimagining what is possible, necessary and desirable for each organisation. This usually requires some external input to help develop a workable target operating model – quickly followed by a stocktake of current assets and approaches.

The hard part – the critical part – is developing the transformation roadmap that integrates into all the other roadmaps in the business such that you avoid silos, stranded assets, and change fatigue.

Overlay this with the rapid pace of change in the financial crime space (think digital currencies, fungible and non-fungible tokens, new payment platforms, to call out just a few ‘money’ based ones) and you need to be on top of your game to get the best outcome possible.

Many challenges to consider

One of the challenges even for seasoned practitioners is to understand how connected the disparate parts of the financial crime world are – especially when there is technology in the middle.

For example, would you think that AML, FATCA, modern slavery, bribery and corruption, theft and fraud, tax evasion, extortion, and whistleblowing are all connected? Well, they are if you think about the role of transaction monitoring software and how it is used to not just detect money laundering but also provide exculpatory or confirmatory evidence for other offences or processes (like whistleblowing).

When data is the currency, technology is never far away and financial crime, like most other business domains, can be reimagined by clever use of technology.

“Financial crime practitioners have come to understand the fundamental difference between financial crime and all other consumer behaviour. Financial crime is all about finding people who do not want to be found. Brand, sales and marketing practices are all about trying to find and influence people who are happy to be found.”

So why are businesses not doing more in this space? Well, I think they are starting to do a lot more. AML SaaS technologies alone are driving the rapid transformation of AML shops around the world – but what is often missing is the internal ‘bigger picture’ thinking that helps the organisation renovate the whole kitchen, not just swap out the sink.

Mind you, I do not blame many organisations for dragging their feet. There is a myriad of smaller forces nudging and confusing this space.

New threats from newish technologies like blockchain, new data regimes like open banking, non-linear regulatory change around key risk areas (AML, bribery and corruption, modern slavery all have new bits at different times in 2021), and a skills shortage in the space (caused by both overall growth and big 4 banks hovering up fin crime resources in response to TAB, CBA and Westpac cases).

Take stock, then find the gaps

Like most things in life – seek first to understand. Even if you do not know where you want or need to be – do a stocktake of where you are. From there you can measure your gaps as you learn where you want to be – and avoid unnecessary expenditure and lack of business integration.

My last word on this is to say that financial crime practitioners have come to understand the fundamental difference between financial crime and all other consumer behaviour.

Financial crime is all about finding people who do not want to be found. Brand, sales and marketing practices are all about trying to find and influence people who are happy to be found.

Therein lies the critical pivot in the design and operation of effective financial crime management systems.

Sean Coady

Chief Executive Officer

As a qualified lawyer and passionate technologist, Sean loves to work with clients to help them understand, articulate and reimagine their most important business challenges. He has focused on risk management and decision quality over the last few years and in this 4IR spends as much time helping clients think about emerging risk and opportunity, as about how they best design their risk management, compliance and assurance capabilities to meet existing expectations.

Ronald Daliya

Senior Manager, Risk Consulting

Ronald is a senior risk, compliance and transformation delivery specialist with over 20 years of experience in Australia, Europe and the US. Ronald assists clients in identifying appropriate, sustainable, commercial and compliant solutions through the delivery of specialist advice or the establishment of projects or programs of work. He also collaborates with a number of RegTech solution providers to develop products, services and solutions. Ronald has worked in a number of sectors including Legal, Superannuation, Wealth Management and Retail/ Institutional Banking.

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