The greediest people in financial services are not who you thought they are

Financial crime compliance has grown from small beginnings in the Bank Secrecy Act passed by the Nixon Administration in 1970 to combat money laundering. The PATRIOT Act of 2001 added countering the financing of terrorism (CFT) to anti-money laundering (AML). But it is the universalisation of these American precedents through the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation of the Financial Action Task Force (FATF), first promulgated in 2012, which have turned customer due diligence into the one area of the financial services industry that is growing everywhere. Estimates of its cost run into hundreds of billions of dollars, even without taking into account the fines levied on regulators by the non-compliant or the insufficiently vigilant.

One company which has prospered from helping financial institutions battle financial crime is NICE Actimize. Dominic Hobson, co-founder of Future of Finance, spoke to Stephen Taylor, General Manager, Anti-Money Laundering, at NICE Actimize, about how financial institutions manage the problem, how the problem is mutating, which business areas face the gravest threats and how techniques to combat financial crime are evolving.

Questions that are being asked

1. We tend to lump together the obligations laid on financial institutions to combat financial crime – namely, Know Your Client (KYC), Anti Money Laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions screening. In practical, day-to-day operational terms within financial institutions, how much overlap is there between these duties?

2. Does financial crime get the senior management attention it deserves?

3. In your experience, which company officer really takes responsibility for financial crime – CTO, CIO, CISO, CRO, COO, CFO or CEO?

4. Culturally, to what extent is financial crime compliance viewed inside financial institutions as a “business prevention department”?

5. Do you find financial institutions operate in silos (a) between business lines (e. g. cash versus securities) and/or (b) between functions (e. g. KYC/customer due diligence versus suspicious transaction reports) and, if so, would closer integration be helpful?

6. How well integrated are your own products and services across customer due diligence (CDD), Know Your Client (KYC), Anti Money Laundering (AML), Countering the Financing of Terrorism (CFT and sanctions screening?

7. A major problem in financial crime compliance is the high rate of false positives. What can be done to reduce them?

8. Establishing corporate identities is generally harder than establishing retail ones, and the Actimize Trust Score is designed to help. How is it calculated?

9. What is “identity resolution”?

10. Do you believe in the usefulness of corporate digital identities?

11. Corporates are fictitious legal personalities, and it is company officers only that can commit the company. How do you police who is and is not authorised to commit the company?

12. In what ways are artificial intelligence (AI) and machine learning (ML) helping, e. g. reading more data, cutting costs, reducing false positives etc.?

13. Detecting and preventing financial crime entails understanding networks (i.e. who is dealing with who) as well as actors. What work are you doing in that field?

14. NICE Actimize has excellent penetration of the global banking and insurance industries. To what extent are firms in the same industry prepared to collaborate – and would more collaboration be helpful? If so, what form should it take?

15. To what extent can you improve on the standard databases used by financial institutions, such as WorldCheck and Bureau van Dijk?

16. How much access do you have to the proprietary data of your customers (and how valuable is it)?

17. Financial crime has historically concentrated on the payments industry, for the obvious reason that money is changing hands. Do you think criminals are now switching their attention to (a) the securities industry and (b) the trade finance industry?

18. Are regulators switching their attention too (securities industry fines for breaches are increasing and in September the FCA wrote a “Dear CEO” letter to trade finance firms instructing them to improve their anti-crime procedures)?

19. The shrinkage in the number of banks engaged in correspondent banking and trade finance is directly correlated with the risk of financial crime. What can be done to help financial institutions Know the Customers of the Client (KYCC)?

20. Do you believe that securities firms and trade finance firms are increasing their preparedness to tackle financial crime?

21. Are you familiar with the ISSA Financial Crime Compliance Principles for Securities Custody and Settlement?

22. How has digitisation of services changed financial crime detection and resolution?

23. In what ways have crypto-currencies changed financial crime detection and resolution?

24. Tokenization of a range of asset classes (real estate, commodities, precious metals, fine art, collectibles, intellectual property) is now beginning. What should issuers and investors be thinking about to manage the risks of financial crime associated specifically with these asset classes?

25. Financial crimes have been committed in the Non-Fungible Token (NFT) markets already – for example, a false Banksy was sold for £244,000. Do you think NFTs represent a specific form of risk?

26. NICE Actimize also provides market surveillance services, to monitor activity for insider dealing and market abuse. In what way would these services be adapted if regulated blockchain-based token trading networks become commonplace?

27. What are the great growth opportunities you see geographically (your business is mainly in the United States and Europe – what about Asia), in terms of financial markets or asset classes (e. g. securities, digital assets) and in terms of technologies (e. g. AI, RPA, blockchain, Cloud, quantum computing)?

28. Is financial crime a soluble problem or a Red Queen race in which you have to run fast to stand still?

29. Are governments and national police forces as committed to combating financial crime as they should be?