Financial Crime World

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Transforming Bank Risk Operating Models

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Banks are facing a rapidly changing landscape of financial crime, fraud, and cybersecurity. In response, they are transforming their risk operating models to stay ahead of emerging threats.

Benefits of Unifying Risk Functions

Unifying risk functions can bring numerous benefits to banks, including:

  • Enhanced Customer Identification and Verification: By integrating customer data and verification processes, banks can improve the accuracy and efficiency of onboarding and KYC procedures.
  • Improved Predictive Analytics through AI and Machine Learning: Unified risk models can leverage advanced analytics to identify patterns and predict potential threats, enabling proactive measures to mitigate risks.
  • Reduced Rates of False Positives in Detection Algorithms: By streamlining data sharing and integrating detection systems, banks can minimize false positives and reduce the burden on their teams.
  • Increased Regulatory Preparedness: Unified risk models can help prevent potential breaches and ensure that banks are better equipped to respond to regulatory requirements.
  • Optimized Customer Experience: By providing a seamless and secure experience, banks can foster digital trust and differentiate themselves from competitors.
  • Fosters Digital Trust, a Key Differentiator for Banks: A unified risk model can enable banks to demonstrate their commitment to customer security and trustworthiness.

Key Questions to Ponder

When designing a target risk operating model, banks should consider the following questions:

Processes and Activities

  • What are the key processes or activities to be conducted?
  • How frequently should specific activities be conducted?

People and Organization

  • Who are the relevant stakeholders in each line of defense?
  • What skills and how many people are needed to support activities?

Data, Tools, and Technologies

  • What data should be shared across cybersecurity, fraud, and other financial-crime divisions?
  • Can data sit in the same data warehouses for consistency and streamlining?

Governance

  • What are the governance bodies for each risk type?
  • How do they overlap?

Examples of Bank Transformation

Several banks are redefining their organizational structures and capabilities to address the evolving landscape of financial crime, fraud, and cybersecurity. For example:

  1. A Leading US Bank: Set up a holistic “center of excellence” to enable end-to-end decision making across fraud and cybersecurity.
  2. A Global Universal Bank: Combined all operations related to financial crimes, including fraud and AML, into a single global utility.

These examples demonstrate how banks are transforming their risk operating models to stay ahead of emerging threats and ensure the security of their customers and operations.