effective use of technology in combating financial crime · importance of technology in combating...

Effective use of technology in combating financial crime

David Choi and Matthew Russell

www.pwc.com/financialcrime

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Introductions

David ChoiPartner, Financial Services Risk & Regulation (FSRR)

Matthew RussellDirector, Financial Services Risk & Regulation (FSRR)

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www.pwc.co.uk/fsrr

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Agenda

Section one – Why is technology important now?

Section two – What are the challenges?

Section three – Leveraging technology in combating financial crime

Section four – Identifying the keys to success

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Why is technology important now?

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March 2015

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Drivers for effective use of technology

Duration in which the world creates as much information as it did from the beginning of time

2 days2 days

Financial crime compliance is moving from policy and procedures to an operations and assurance level now

$ 10Bn$ 10BnTotal fines levied by US and UK regulators for breaches of AML and Sanctions regulations

P&P > OpsP&P > Ops

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Importance of technology in combating financial crime

Risk Management

• It is every banks goal to focus on doing the right thing and to shape effective strategies

Regulatory Demand

• The regulatory landscape is an ever shifting environment posing challenges to organisations who must comply

Cost Benefits

• Implementation of right technology to gain efficiencies and overcome implicit risk of non-compliance

Operational Excellence

• Application of principles, systems, and tools toward the sustainable improvement of

key performance metrics

Leveraging Technology

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What are regulators doing with technology?

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Technology touch-points throughout the customer lifecycle

1 2 3 4 5 6

eID&V

Scanning / Optical Character Recognition

Application Onboarding Product Usage

New Products

Cross Border Activity

Customer Exit

Sanctions, PEP & watchlistscreening

Transaction Monitoring

Negative news

screening

Federated searches

Analytics

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What are the challenges?

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Key challenges in leveraging technology

Choosing Solutions – What and how to implement?

Optimisation – Standardising processes and procedures

Data Privacy – Restrictions across jurisdictions and roles?

Cost Benefits– Justifying the use of advanced technology

People – Getting the right people to do the job

Data Quality – Processes and standards to ensure quality

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How can holistic insights be created across enterprise, geographies and business lines?

Retail Commercial Brokerage Private Bank

Internal and External Data Sources

AML Fraud Operational

Transaction Monitoring

Know Your Customer

Investigations and reporting

Governance and oversight

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What are emerging trends in compliance technology?

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Leveraging technology in combating financial crime

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March 2015

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Keys to effective correspondent banking transaction monitoring

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Source System 1

Source system 2

Source System 3

Transaction monitoring database

Aggregate data

SEGMENTATION

Segment A

Segment B

Segment C

Segment D

Segment E

MODELS

RULES

Scenario 1

Scenario 2

Scenario 3

Scenario 4

THRESHOLDS

Alert 1

Alert 2

Alert 3

Alert 4

RISKSCORING

Score 100

Score 90

Score 80

Score 70

Score 60

Score 50

Score 40

Score 30

Score 20

Score 10

Case Management

System

Data Completeness

and Data Quality

Geography Enrichment

Entity Consolidation

Pseudo-customer Segmentation

Threshold Tuning

Scenario Tuning

Alert Prioritisation Model

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How do we ensure data quality from all of these fields?

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A more targeted approach for higher risk products or segments

Risk Assessment

Jurisdictional Risk Product Risk Customer Risk

Model Governance

Optimisation

Screening

Watchlist

Sanctions

Negative News

Transaction and Activity Monitoring

Case Management

Onboarding

Know Your Customer

Customer Due

Diligence

Enhanced Due

Diligence

Segmentation

Risk Scoring

Validation

Financial Crime Intelligence

InvestigationsAnalytics

Data Scientists

Statisticians

Data Modellers

Compliance

Investigators

Enforcement

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Proactive and agile targeted reviews: Identify emerging risks and quickly mobilise teams to investigate potential risks

Connecting the dots: Pulling together information across siloes (e.g., across different business units and countries)

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How can analytics help uncover typologies and hidden networks?

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What type of resources and skills are required in financial crime compliance that wasn't needed

before?

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Onboarding and customer risk assessment

Product Risk

Geographic Risk

Business Type Risk

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Effective model governance

Federated searches to automate triggers

Enhancement of underlying data sources, including use of Optical Character Recognition and link analysis (e.g. Trade Finance)

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What is a financial crime model and what validation is being applied?

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Biometrics adoption

Biometrics

‘Finger vein’ readers to circumvent cloned fingerprints

Voice recognition software deployed across call centres

Finger print authentication for mobile banking apps

Uniquely identifying customers

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What future technologies will present threats or opportunities to financial crime prevention?

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Identifying the keys to success

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What are the keys to success?

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The keys to the successful leveraging of technology

Effective Solutions – Selecting the right technology

Optimisation – Continual improvement of solutions

Data Privacy – Understand and work within constraints

Cost Benefits – Demonstrate benefit from tactical activities

People – Combine technical skills with industry knowledge

Data Quality –Augmentation and effective capture of data

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Questions?

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Contact details

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David Choi7 More London Riverside,London, SE1 2RTUnited Kingdom

T: +44 (0) 2072121809M: +44 (0) 7703562372david.d.choi@uk.pwc.com

David ChoiPartner, Financial Services Risk & Regulation

Matthew Russell1 Embankment PlaceLondon, WC2N 6RHUnited Kingdom

T: +44 (0) 20 780 44227M: +44 (0) 7803 858642matthew.russell@uk.pwc.com

Matthew RussellDirector, Financial Services Risk & Regulation

www.pwc.com/financialcrime

Thank you

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