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Banks Must Upgrade Crime-Detection Capabilities to Stay Ahead of Sophisticated Schemes
A report by Bain & Company and Parker Fitzgerald highlights the need for banks to upgrade their crime-detection capabilities to stay ahead of sophisticated fraud and money-laundering schemes.
Traditional Methods No Longer Suffice
The report warns that traditional methods of combating financial crimes are no longer sufficient, as criminals increasingly use advanced technology to evade detection. Banks must adopt more powerful analytical models, artificial intelligence, and partner with regulatory technology firms (regtechs) to stay competitive.
Seamless End-to-End Compliance Process Key to Success
Banks that excel in compliance will be those that build a seamless end-to-end compliance process, combining the strengths of people and machines. This requires a shift towards Agile ways of working, adopting new technologies, and outsourcing activities to regtechs where necessary.
Regtechs: The Future of Financial Crimes Compliance
Regtechs have developed expertise in areas such as:
- Know-your-customer
- Anti-money-laundering
- Customer onboarding
- Workflow process management
They offer a cost-effective way for banks to upgrade their compliance capabilities without investing heavily in new technology. However, regtech partnerships require careful consideration of:
- Legal and regulatory compliance
- Operations
- IT
- Culture
- Project management
Banks must be willing to adapt to Agile methods and adopt new technologies to collaborate effectively with regtechs.
The Stakes are High
As bank supervisors increase their scrutiny of bank compliance, the consequences of failure will be severe. Banks that fail to upgrade their crime-detection capabilities will risk falling behind the curve and facing significant reputational and financial damage.
Conclusion
In conclusion, banks must invest in upgrading their crime-detection capabilities by adopting advanced analytics, artificial intelligence, and regtech partnerships. Those that succeed will be those that build a seamless end-to-end compliance process, combining the strengths of people and machines, and adopt Agile ways of working to stay ahead of the curve.
About the Authors
Jan-Alexander Huber and Matthias Memminger are partners in Bain & Company’s Financial Services practice, based in Frankfurt. Michael Soppitt is a partner with Parker Fitzgerald’s Digital Risk Solutions practice, based in London. Matthew Hayday leads Parker Fitzgerald’s Risk Technology practice, also based in London.
About Parker Fitzgerald
Parker Fitzgerald is a global leader in risk management solutions for the banking and capital markets industry, focused on improving resilience and risk-adjusted performance. The firm advises international regulators, governments, and key industry bodies in all areas of:
- Risk management
- Capital and liquidity management
- Market conduct
- Impacts of financial technology