Effective Combat of Financial Crime: 5 Key Areas for Payment Service Providers (PSPs)
Introduction
Payment Service Providers (PSPs) play a crucial role in the fight against financial crime. However, managing these risks can be challenging without compromising the customer experience. In this article, we’ll explore five key areas where PSPs should focus their efforts to combat financial crime effectively while maintaining a positive customer experience.
1. Embedding Controls within Processes and Decisions
PSPs must design compliant-by-design processes that are efficient and effective in managing financial-crime risks. This involves integrating controls into every stage of the payment process, from onboarding to transaction monitoring. By doing so, PSPs can ensure that their systems and processes are inherently resilient against financial crime.
2. Designing Controls in Proportion to the Business Model
PSPs should invest in more effective and efficient controls and frameworks, especially when serving high-risk sectors such as crypto or digital-asset platforms. This requires a deep understanding of the business model and the specific risks associated with each sector. By tailoring their controls to the unique needs of their customers, PSPs can minimize unnecessary regulatory burdens while maintaining robust anti-financial-crime capabilities.
3. Thinking Ahead and Focusing on Data
PSPs should define data requirements early, standardize and capture relevant data, and use it to improve customer experiences and business decision-making. This involves leveraging advanced analytics and machine learning to identify patterns and anomalies that may indicate financial crime. By focusing on data-driven insights, PSPs can stay ahead of emerging threats and respond quickly to new risks.
4. Building a Business Case for Infrastructure Investments
PSPs should support infrastructure investments with clear business cases to avoid expensive solutions that are only marginally effective. This requires a thorough understanding of the costs and benefits associated with each investment, as well as the potential return on investment (ROI). By building a solid business case, PSPs can ensure that their infrastructure investments align with their strategic goals and maximize value for customers.
5. Planning for Complexity
Establishing a robust and effective infrastructure for managing financial-crime risks is a complex undertaking that requires dedicated experts. PSPs should plan carefully to avoid the pitfalls of ineffective approaches, such as high false-positive rates or unnecessary regulatory burdens. By investing in skilled professionals and advanced technologies, PSPs can create a resilient anti-financial-crime framework that enhances their ESG profiles while maintaining customer satisfaction.
Lessons from the Banking Sector
Banks have invested heavily in detection infrastructure but often produced outcomes with high false-positive rates. To avoid wasting resources on ineffective approaches, PSPs should:
- Embed controls within processes and decisions
- Design controls in proportion to the business model
- Think ahead and focus on data
- Build a business case for infrastructure investments
- Plan for complexity
By following these strategies, PSPs can create effective anti-financial-crime capabilities that enhance their ESG profiles while maintaining customer satisfaction.