Financial Crime, Risk & the Financial Services Sector
When financial crime and the financial services sector are hitting headlines, the news is rarely positive. Whether the headline surrounds money laundering scandals or heightened regulations, financial crime is not lacking headline making news.
Financial crime, thanks to globalisation and technology, is diversifying and leaving businesses in the financial services sector increasingly vulnerable. From advanced banking technologies to cognitive advancements, financial crime through multi-pronged attacks are a growing trend for criminals targeting the sector. Beyond these attacks, the growing operational costs of financial crime monitoring is leaving the sector stretched thin, challenged by their unchanging or even diminishing internal budgets.
Risk Managers working in the financial services sector have traditionally taken a silo-based approach, with risk and compliance functions operating independently. Going further, risks such as fraud and money laundering have traditionally been further separated and treated reactively. This siloed risk management approach is proving increasingly ineffective. Restricting a wider organisation understanding, pinpointing behaviour patterns of these growingly sophisticated attacks is impossible with this siloed strategy.
Along with the burden of financial crime, compliance regulations are escalating in complexity to satisfy customer and investor demands for transparency and integrity in financial dealings. When coupled, the burden of financial crime risks and the growing regulatory landscape calls for the fusion and alignment of compliance and risk functions. Beyond the wholistic viewpoints gained, an integrated risk and compliance function could save businesses up to thirty percent according to Tier One financial institutes.
With this understanding, financial organisations are starting to abandon this siloed approach adopting a more comprehensive financial crime management strategy. This strategy combines risk and compliance internally and calls for collaboration and sharing of intelligence and data within the wider banking and FinTech industry. With this sharing, the sectors prevalent financial crime trends will be more widely trackable. Yet reaching this level of open sharing calls for leadership and vision within the sector, along with the regulatory backing to overcome jurisdictional differences and data privacy concerns. Internally, direct communication channels become open with the abandonment of the siloed approach and more comprehensive view of normal and abnormal behaviour is built. Knocking down these walls, this more singular view opens companies to more easily identify protentional risks and complex financial crime scenarios.
With escalating financial crime and regulatory scrutiny, the financial sector is experiencing more risk than ever before. By the financial services sector opening their approach and abandoning their siloed strategy in the process, companies can holistically tackle financial crime. To genuinely combat financial crime, the internal risk management strategy must support this holistic approach.