Palau’s Financial Crime Battle: How Data Analytics Can Help
The Global Fight Against Financial Crime
The global fight against financial crime has never been more challenging. With an estimated annual cost of US$1.3 trillion and over US$26 billion in fines imposed by regulators for non-compliance, it is clear that this issue affects not only individual institutions but also the entire financial ecosystem.
Palau’s Financial Institutions: On the Front Lines
Palauan financial institutions are no exception to these pressures. Governments and regulators expect them to be on the front lines in combating money laundering, market misconduct, sanctions evasion, terrorist financing, and bribery and corruption. Despite their best efforts, banks have traditionally relied heavily on manual processes and legacy technologies that struggle to keep pace with the vast amounts of data being generated.
Leveraging Data Analytics for Regulatory Compliance
Innovative solutions are emerging that can accelerate or automate labor-intensive work, reducing operational costs and allowing compliance teams to focus on preventative interventions. According to Yoon Chung, EY Asia-Pacific FSO Data & Analytics Director, machine learning models have been shown to detect “true positive” results with greater accuracy than traditional methods, even predicting significant events before they occur.
Opportunities for Palauan Banks
Here are three examples of opportunities for Palauan banks to leverage data analytics and technologies to improve regulatory compliance, enhance customer experience, and lower operational risk management costs:
Transaction Monitoring
- Machine learning models can enrich alerts and boost Suspicious Matter Report conversion rates by predicting AML scenarios before they occur.
Know Your Customer (KYC)
- Analytics can enable customer segmentation and profiling for various business purposes, including compliance and marketing, while also reducing manual and inefficient KYC verification processes.
Sanctions Screening
- Tuning the matching and filtering performance of screening engines requires accurate data, which can be addressed through emerging AI and analytical methods.
Aligning Operational Effectiveness with Financial Crime Risk Mitigation
To align operational effectiveness with the demands of mitigating financial crime risks, Palauan banks must seek innovative ways to address issues surrounding SMR conversion rates, KYC due diligence, and screening alert management. By leveraging data and technology, they can identify potential criminal behavior more cost-effectively and prevent criminal activity from occurring in the first place.
The Importance of Complete and Accurate Data
Complete and accurate data is essential to resolving these issues, and an uplift of 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.
Intelligence-Led and Data-Driven Approach
When it comes to fighting financial crime, Palauan banks must adopt an intelligence-led and data-driven approach that leverages advanced analytics and technologies to drive efficiencies, operational cost reductions, and identify new ways to tackle financial crime. As Blair Delzoppo, EY Asia-Pacific FSO Data & Analytics Partner, notes, “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.”