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...

Reserve Banking: The New Radical Idea

June 5, 2014
/   Insights

Banking is by nature a very conservative industry. That’s why the current buzz over ‘reserve banking’ is so interesting. Even the term seems innocuous, but the scenario it proposes is nothing short of revolutionary....

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...

Contributor Christine Moran

Contributor Christine Moran

This is Part 1 of a two-part series from FTI Consulting. Read the first part here.

The volume and pace of transactions in global financial markets – magnified and accelerated by new technologies – is mind-boggling. It has been estimated, for example, that every day there is $2.9 trillion worth of stocks, bonds and derivatives traded in U.S. financial markets.   It’s easy to see how this makes monitoring both client onboarding and financial transactions monumentally difficult.

For instance, in recent months an internal Vatican Bank investigation found that it had not been adequately vetting account holders, allowing criminals to launder money and transfer large sums via proxies. Last summer, German regulatory agency BaFin found Deutche Bank, with over €2 trillion in assets, laggard in reporting suspicious transactions to police due to inadequate internal controls.

Governments and regulatory bodies are well aware of the difficulty of policing transactional activity, as well as violations of international sanctions against countries with ties to terrorism, or with poor human rights records. Understaffed and underfunded, these bodies would like to shift their burden to the financial institutions, seeing that as the only way to keep ill-gotten money out of the financial system and to de-fund criminals and terrorists. And they are driving this agenda with a flurry of fines.

Contributor Peter Brooke

Contributor Peter Brooke

U.S. enforcement authorities, flexing their regulatory muscles, recently have imposed fines for sanctions breaches on Lloyds Banking Group ($350 million), Barclays ($298 million), and Standard Chartered ($327 million).  In the UK, the Financial Services Authority imposed a fine of £5.6 million on RBS for similar transgressions.

The U.S. Department of Justice and the Securities Exchange Commission are using the Bank Secrecy and Foreign Corrupt Practices acts to demand greater due diligence from all parties involved in transactions, holding them responsible for both sins of commission (such as facilitating money laundering or committing sanctions breaches) and omission (failing to implement sufficiently strong internal controls against either or both). In short, governments are making it clear that they will not tolerate what they deem to be reckless conduct on the part of financial institutions, or what they see as a weak commitment to abiding by international rules regarding sanctions and money laundering.

Financial institutions argue that the expectation that they can act as a branch of law enforcement is unreasonable. They cannot, they say, monitor every transaction or client with 100 percent certainty or make their businesses risk-free. They say the investment they must make in people, processes and technology to attempt to comply with regulations and avoid being implicated in financial crime places a massive strain on their resources. And, they point out, there is a limited pool of experienced people they can draw upon to lead, manage and run anti-money laundering and sanctions compliance programs.

In this debate, financial institutions are bound to lose. They have no choice but to get smarter about both client and transactional risk, and do more about them.

This will require top-level leadership, and a risk-based approach to mitigating financial and transactional risk. In part two of this article, we will discuss how financial institutions can do this.

 

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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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.

Zachary Ehrlich

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