creating an agile technological infrastructure

CONFIDENTIAL

Creating an Agile Technological Infrastructure8 June 2019 | Caribbean Association of Banks CEO and Director Forum

2CONFIDENTIAL© Copyright Promontory Financial Group, an IBM Company. All rights reserved.

Today’s Facilitator

Nikhil Aggarwal | Director, Financial Crimes Solutions Center

Nikhil has extensive experience in program design and review, with a

focus on applying machine learning and analytics to risk assessments,

models for rating client risks, transaction-monitoring system optimization,

suspicious-activity reporting, metrics and reporting, and model

validation. Nikhil joined Promontory from Standard Chartered, where he

headed the analytics function for financial-crime compliance. His roles

included leading a global team of data analysts and data scientists to set

and maintain the operating parameters of the bank’s monitoring,

screening, and filtering systems.


Introduction to Promontory

Promontory excels at helping clients resolve critical issues,

particularly those with a risk management or regulatory dimension.

Promontory is a leading strategy, risk management, and regulatory-compliance

consulting firm focusing on the financial services industry. Our professionals, with

deep expertise gained through decades of leadership at regulatory bodies and

Fortune 100 corporations, help entities understand and implement global and

national financial services regulation. Founded in 2001 by Chief Executive Officer

Eugene A. Ludwig, former U.S. comptroller of the currency, Promontory became a

wholly owned subsidiary of IBM in 2016.

We assist our clients with:

• Complex and time-sensitive circumstances that require thoughtful, unique

solutions

• Regulatory matters, including directives, orders, and compliance issues

• Evaluation against industry and regulatory standards


Objective for Today’s Discussion

In the ever-changing world of technology, the following outline will assist in guiding our conversation:

Agile from the perspective of technological

infrastructure: What CEOs/Directors need to

know from an anti-money laundering

perspective

Describe and discuss the successes

that have come to fruition through

an AML Consortium

Agile Technological Infrastructure


Agile Technology Framework: What CEOs/Directors Need to know

Core Advantages of AGILE

• Facilitates rapid experimentation, and iterative and

continuous development that embraces changing

requirements.

• Delivers user value and validates that user value.

Ongoing engagement between business and technical

teams.

• Organized as sprints, concentrate on delivering working

infrastructure and software frequently. Simplicity and

feedback loop.

The Case for AGILE Technological Infrastructure

• Faster deployment

• Increased flexibility

• Continuous Feedback

• Continuous Improvement

• Self-service tools

• Integrated cross-functional teams

• Process automation and streamlining

Agile is principally used in software development and as a project management methodology.


The Problem with the Waterfall Approach…

https://medium.com/@warren2lynch/what-is-the-problems-of-waterfall-model-38de858f1058https://medium.com/@warren2lynch/what-is-the-problems-of-waterfall-model-38de858f1058


Technological Infrastructure

https://www.quora.com/What-is-the-difference-between-public-cloud-and-private-cloud

Core Components:

• Data Center Services

⎻ On-premises

⎻ Cloud

• Application Support

• Network Management

• End User Services

• Information Security

• Data Privacy

Private Cloud Public Cloud

Hybrid Cloud

An integrated environment including public

and private cloud, with supporting

technologies for integration and multi-cloud

management.Hybrid Cloud

A private cloud platform includes a portfolio

of containerized middleware offerings to

extend cloud functionality throughout the

enterprise.Private Cloud

A broad range of compute choices: From

bare metal and virtual servers, to serverless

architectures, to Cloud Foundry apps, to

Kubernetes containers.Public Cloud

Use Case: Anti-Money Laundering and

Sanctions


Anti-money Laundering at a Glance

• The United Nations estimates the

amount of money laundered money

every year is between $800 billion and

$2 trillion, or about 2–5% of global

GDP.

• Of that, transnational organized crime

amounts to 1.5% of global GDP.

• 70% of those proceeds are laundered

through the financial system.

• Less than 1% of global illicit financial

flows is seized and frozen.

Scale of the Issue


The Current Approach to Financial Crimes Compliance Is Unsustainable

Costs Increasing

at an Unsustainable Rate,

and Growing Fines

• $8B AML fines in 2014

from failures to adhere to

compliance programs and

practices

Alert Overload

from Current Outdated

Systems and Processes

• <1% of alerts become

SARs/STRs due to false

positives from narrow data

sets and current analytic

techniques

Processes Lack

Standardization and

Consistency

• 30+ sources to be

searched, with different

approaches taking

2+ hours per client/alert

Highly Manual Processes

that Do Not Make Good Use

of People’s Time

• 1,000s of hours spent

collecting data, compiling

information before being

able to analyze it


• Financial institutions of all sizes face certain systemic

challenges

in AML compliance

• Banks have attempted to address them for years, investing

billions of dollars

• Current approaches are ineffective and inefficient

Identifying Systemic AML Challenges

• The purpose of this case study is to understand how

technology/infrastructure will enable a collaborative solution


These considerations – among others – will inform the collaborative

features, design, governance, and the path forward.Guiding Principles

What Has Been Considered by Bank’s in AML Consortium Design

LandscapePolitical and regulatory

backdrop

ParticipationMembership, ownership, and

governance

Scope and ProcessesMandate, process

alignment, and level of

information sharing

DataSecurity and availability

Regulatory InteractionEngaging local

regulators

• Focus on effectiveness

• Encourage inclusive

participation by financial

institutions over time

• Establish a governance

structure that provides for

effective decision making

• Foster innovation and

investment in technology

and improved methods

• Protect data and privacy while

collaborating to more effectively

mitigate financial crime


Key Takeaways

Agile Approach

• Technology related issues can be approached through an

Agile lens that involves:

⎼ Rapid experimentation, and iterative and continuous

development;

⎼ Ongoing engagement between business and

technical teams; and

⎼ Approaching problems in short-sprints that work

towards an overarching goal.

• The benefits to approaching goals with Agile are:

⎼ Faster deployment;

⎼ Increased flexibility;

⎼ Continuous feedback; and

⎼ Continuous improvement.

Applying a Consortium Model

• Consortiums have taken the following approaches:

⎼ Convergence of approaches;

⎼ Sharing of Transactional / KYC / Alert Data;

⎼ Consortium-based transaction-monitoring;

⎼ Consortium-based KYC; and/or

⎼ Consortium-based Transaction Monitoring and KYC.

• Banks in the past have considered the following factors

when considering a Consortium approach:

⎼ The political and regulatory landscape;

⎼ Security and availability of data;

⎼ The scope and process;

⎼ Membership, ownership, and governance; and

⎼ Regulatory interaction.

Questions

creating an agile technological infrastructure

Documents