Financial Institutions Embrace New Approach to Fighting Financial Crime
Financial institutions are shifting away from traditional procedure-driven approaches and towards an intelligence-driven, investigator-centered approach to combat financial misdeeds more effectively.
Limitations of the Current Model
The current model is limited in its ability to detect and prevent financial crime, with false-positive rates of up to 90 percent. This has led to a massive strain on organizational resources, with many banks spending more time and effort on inefficient processes than on actually investigating and preventing criminal activity.
A New Approach
To address this issue, financial institutions are building networks of external partnerships with law enforcement agencies, tax-collection authorities, shipping companies, airlines, social media companies, and nonprofits. These collaborations enable the sharing of intelligence and insights, which can be processed and filtered through advanced machine-learning algorithms to identify potential sanctions violations, planned shipping routes, and other suspicious activity.
Streamlining Anti-Money Laundering (AML) Operations
Banks are also streamlining their current AML operations by reviewing all activities and stopping those that are no longer required or beneficial to law enforcement. By automating manual tasks and adding more intelligence to decision-making processes, banks can significantly reduce the strain on resources and free up talent and management resources for more valuable activities.
Benefits of the New Approach
The benefits of this new approach are numerous:
- Dramatically improves effectiveness in detecting and preventing financial crime
- Reduces the strain on organizational resources
- Elevates the profile of financial institutions as socially responsible actors
- Fosters deeper regulatory engagement
Financial Impacts
According to a recent report, large banks can add up to hundreds of millions of dollars by streamlining their current FCC/AML operations and redirecting resources towards more valuable activities. Furthermore, research has shown that companies with improved environmental, social, and corporate governance profiles enjoy higher shareholder value, higher equity returns, and reduced downside risk.
The Future of Financial Crime Fighting
As the financial industry continues to evolve, it is clear that a new approach is needed to combat financial crime effectively. By embracing an intelligence-driven, investigator-centered approach, financial institutions can improve their detection rates, reduce their costs, and enhance their reputation as socially responsible actors in society.