Belgium’s Financial Institutions Lead the Way in Data Analysis for Financial Crime Detection
The Growing Need for Advanced Data Analysis Techniques
In a bid to combat the estimated €1.3 trillion annually lost to financial crime, Belgium’s financial institutions are turning to advanced data analysis techniques and technologies to enhance regulatory compliance, customer experience, and operational risk management.
The Challenges of Manual Processes and Legacy Technologies
According to recent statistics, global regulators have imposed over $26 billion in fines on non-compliant financial services firms in the last decade alone. As governments and regulators increasingly put financial services firms on the front line in the fight against financial crime, trade institutions are finding it challenging to meet these heightened expectations due to manual processes and legacy technologies.
The Importance of Innovation
“Banks that innovate and adopt new technologies and techniques to address regulatory compliance demands will be industry leaders in the years to come,” said Blair Delzoppo, EY Asia-Pacific FSO Data & Analytics Partner. “We have found that machine learning models not only accelerate the closure of a risk alert backlog but in most cases have a higher degree of accuracy.”
Leveraging Advanced Analytics for Preventative Financial Crime Use Cases
Belgian financial institutions are leveraging advanced analytics in a range of preventative financial crime use cases, including:
- Enhancing Know Your Customer (KYC) process
- Improving sanctions screening performance
- Monitoring transactional activity
The Power of Machine Learning and AI Models
“In Anti-Money Laundering, the use of machine learning models can enrich transaction monitoring alerts and boost Suspicious Matter Report (SMR) conversion rates – predicting AML scenarios before they occur,” said Yoon Chung, EY Asia-Pacific FSO Data & Analytics Director. “Machine learning and AI models are faster and more efficient than humans in AML transaction monitoring; the more data they ingest, the more accurate they become.”
Key Opportunities for Banks to Improve Regulatory Compliance and Operational Risk Management
Three key examples of opportunities for banks to use advanced data & analytics techniques and technologies include:
- Transaction Monitoring (TM): By tuning the matching and filtering performance of the screening engine with high-quality data, true positives detection rates can be boosted, and operational efficiency improved.
- Sanctions Screening: Emerging AI and analytical methods can address operational efficiency issues related to case investigation by substantially lowering the number of alerts to be safely dispositioned.
- KYC Due Diligence: Data-driven insights can help compliance teams assess customer risk more effectively, while business or marketing teams can create personalized banking offers based on customer preferences.
The Importance of Complete and Accurate Data
“It’s evident that financial service organizations are being challenged both internally and externally in keeping up with the onerous demands of mitigating financial crime risks,” said Delzoppo. “To align operational effectiveness with these demands, organizations are having to seek innovative ways to address issues surrounding SMR conversion rates, KYC due diligence, and screening alert management.”
Complete and accurate data is essential to resolving these issues, and an uplift in data quality will have immediate effects on the performance of existing monitoring and screening engines. Advanced analytics and cognitive techniques, such as AI, machine learning, and automation, can help filter out false positives and improve inefficiencies in existing investigative processes.
The Future of Financial Crime Detection
“When I talk to clients, they believe that our combination of professional skills and advanced data and analytics products are what help them accelerate results,” said Delzoppo. “Intelligence-led and data-driven approaches to fighting financial crime will become increasingly important for organizations looking to stay ahead of the curve.”