What Causes Profitability?

August 12, 2014
/   Spotlight

Digital Insight proves that digital bankers actually drive increase engagement and profitability with their financial institution.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Cause and Effect: If you build it, will they come?

/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Platform Shift in the Making

February 13, 2013
/   Insights

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already). Consider...

Infographic: How to Spot a Fake Check

March 8, 2013
/   Insights

The team over at TROY pulled together an infographic on how to spot a fraudulent check. With more consumers using remote deposit capture to upload and deposit checks through their smartphones, it’s important to...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

This is Part 2 of a two-part series from FTI Consulting. Read the first part here.

Governments and regulatory bodies increasingly expect financial institutions to man the front lines in the war against international corruption and bribery, levying significant fines against banks that have been used by criminals or have conducted business with sanctioned regimes. To survive in this environment, firms must up their game by implementing risk-based controls to account for both front-end client acquisition and back-end transaction risks.

This effort must be led from the top. Senior management must set the tone and be fully engaged in building the internal controls that can make their organizations less vulnerable both to missteps and the depredations of criminals.

However, given the complexities of global finance, and the cunning of criminals, these defenses need to be risk-based, with the institution’s finite resources devoted appropriately to businesses and jurisdictions with inherently higher risk profiles or weaker control environments.

Mitigating client risk
Client-onboarding rules and processes more be made rigorous before accounts are activated. This requires assessments that can indentify:

  • Politically exposed persons.
  • People with criminal backgrounds or connections.
  • People conducting business in sketchy jurisdictions and geographies.
  • Individuals acting as proxies for hidden players.

Criminals are continually changing their strategies, using opaque structures to hide the true sources and destinations of funds. It is therefore critical to employ experienced investigators to establish the identities of high-risk individuals and entities, especially when they come from countries where this data is difficult to verify.

Mitigating transaction risk
Banks should deploy technologies to filter suspicious transactions. There is a vast array of commercially available tools that can flag unacceptable transactions (such as identifying sanctioned country codes on transfer receipts). They can trigger alerts and automate watch lists for suspicious persons and transactions, and can also produce reports that are critical when an institution finds itself in the regulator’s crosshairs. But all these tools are only as good as the people who use them. Firms must acquire skilled staff to fine-tune the systems as well as to assess and act upon the alerts and reports they produce.

Taking these actions is a statement of good faith. Using up-to-date processes and tools, and staffing the risk-management function as diligently as possible will make regulators less inclined to punish firms that make the occasional, unavoidable mistake.

It’s Never That Simple
Because it’s nearly impossible to define the scope of the problem – that is, how much money is being laundered or moved around the globe by criminals and terrorists – it is hard for institutions to measure the effectiveness of their programs or assign an ROI to their investments. Consequently, they should be measured by what doesn’t happen – fines, reputational damage, remediation costs, and lost business – not what does.

Ultimately, it is unrealistic to think that the financial industry can take on the bad guys by itself. One hopes that the future will bring greater levels of cooperation between governments and the financial sector. Ultimately, that’s the only way to de-fund criminal interests, terrorists, and others who would seek to sabotage the world’s financial system and use it to further their own anti-social ends.

 

Peter Brooke and Christine Moran are Managing Directors in the Governance, Risk and Regulation team at FTI Consulting, based in London.

Peter Brooke is an experienced Risk and Regulation Consultant at FTI Consulting, based in London. With a unique blend of in-house and consulting experience, Mr Brooke has worked in financial services for more than 24 years.

As a highly experienced Group Head of Compliance, Christine Moran is an energetic consultant at FTI Consulting. Based in London, Ms. Moran has a highly collaborative, grounded and commercial approach. She has a proven track record of building enhanced and effective compliance and regulatory risk arrangements in both retail and institutional businesses.

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Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.