Financial Institutions Take a Bold Stand Against Financial Crime
In an effort to combat the growing issue of financial misdeeds, major financial institutions are adopting a new approach. Instead of focusing solely on procedure-driven activities, they are shifting their focus to an intelligence-driven, investigator-centered approach. This bold move aims to dramatically improve effectiveness in detecting and preventing financial crimes such as money laundering, drug trafficking, human trafficking, corruption, and embezzlement.
The Current Flawed Model
According to industry experts, the current model for financial-crime compliance and anti-money laundering (AML) is flawed. With false-positive rates of 90% or more, it means that the majority of efforts are not yielding meaningful results in identifying and mitigating financial crime.
Building a Network of Partnerships
To address this issue, financial institutions are building a network of external partnerships with law enforcement agencies, tax-collection authorities, shipping companies, airlines, social media firms, and non-profit organizations. By sharing intelligence and best practices, these partners can identify patterns and connections that might otherwise go undetected.
The Joint Money-Laundering Intelligence Taskforce (JMLIT)
One example of this collaborative approach is the Joint Money-Launderling Intelligence Taskforce (JMLIT) in the United Kingdom. This partnership involves over 40 financial institutions, the Financial Conduct Authority, Cifas, and five law-enforcement agencies. By sharing information from various industries, JMLIT provides a more complete picture of financial crimes.
Streamlining AML Operations
Financial institutions are also streamlining their AML operations to make them more efficient and effective. By reviewing and eliminating unnecessary activities, automating manual tasks, and adding intelligence to decision-making processes, banks can free up resources for more valuable initiatives.
Benefits of the Investigator-Led Approach
The benefits of this investigator-led approach are numerous:
- Improved effectiveness in detecting financial crimes
- Reduced strain on organizational resources
- Elevated profile as socially responsible actors
According to research, companies with improved environmental, social, and corporate-governance profiles enjoy higher shareholder value, higher equity returns, and a reduction in downside risk. By improving detection and reducing financial crime, banks can build public confidence in the financial system and contribute to a safer and more transparent global economy.
Industry Leaders’ Call to Action
Industry leaders are urging regulators to provide incentives for banks to adopt this new approach and to create safe harbors for testing innovative solutions. By working together, financial institutions and regulatory bodies can develop a more effective strategy for combating financial crime and protecting the integrity of the financial system.
Key Takeaways
- Financial institutions are shifting their focus from procedure-driven activities to an intelligence-driven, investigator-centered approach.
- The current model for financial-crime compliance and anti-money laundering is flawed, with false-positive rates of 90% or more.
- Building a network of external partnerships can help identify patterns and connections that might otherwise go undetected.
- Streamlining AML operations can make them more efficient and effective, freeing up resources for more valuable initiatives.
- The benefits of this approach include improved effectiveness in detecting financial crimes, reduced strain on organizational resources, and elevated profile as socially responsible actors.