overview on trends and developments - pwc · source: pwc global economic crime survey 2016 4...

Fight against Financial Crime

Overview on trends and developments

www.pwc.lu

Financial Crime

15 February 2017

PwC

What is Financial Crime

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February 2017Financial Crime

PwC

Financial Crime – a significant threat to organisations

Financial crime

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https://www.youtube.com/watch?v=SFKDmCbfMS4&feature=youtu.be

PwC

Financial Services organisations are a key victim of financial crime…

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PwC

Top three most reported types of economic crime 2016 in Luxembourg

“Old school” crimes remain

top, but one pervasive

enemy jumps ahead

While traditional asset misappropriation, money laundering, bribery/corruption, procurement fraud and accounting fraud all do occur, one crime really is “en vogue” currently.

Cybercrime has jump-started to the top.

#2#1 #3Cybercrime

Asset Misappropriation

Money Laundering

Source: PwC Global Economic Crime Survey 2016

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PwC

Financial Crime – Global trends 2017

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PwC

The good, the bad and the ugly – the top ten: PwC’s Global Financial Crime team hot topics for 2017

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1. A slowdown in new regulationFewer new financial crime regulations being issued, but a relentless focus by regulators on effective compliance with existing requirements. Patience is running out with delays in implementing strong Anti-Financial Crime (AFC) controls and a greater emphasis on personal accountability.

2. More intrusive surveillanceMore surveillance of employees’ business activities, incl. more sophisticated voice surveillance and trade monitoring, will become the norm, partly reflecting increased regulatory scrutiny on fraud, market abuse and anti-bribery and corruption controls.

3. The convergence of financial and cyber crimeFinancial and cyber crime will increasingly converge, driving a greater focus on a more coordinated response, including combined risk and threat assessments for new digital products or digitized activities.

4. Data, data, dataThe establishment and use of data lakes containing data to help prevent and detect financial crime will continue; potentially transformational changes in the speed and sophistication of analytical and other tools used with this data. AI and machine learning solutions will further enhance what can be done.

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1EURO

5. Biometrics and Blockchain2017 could become the year in which biometrics and blockchain gain traction. The use of biometrics and other digital identity technology has the potential to transform customer onboarding. Some blockchain use cases will help prevent and detect financial crime. Combined, and used effectively together, they could make a real difference.

6. Outside the banking sectorRenewed and greater focus by regulators on the effectiveness of anti-financial crime controls in the insurance, asset management and private wealth management sectors. Historic levels of reliance placed by some on controls carried out by banks and others is becoming harder to justify.

7. The cost problemAnti-financial crime costs continue at a peak; new IT and increased efficiency could solve this, like new operating models and the use of technology enabled managed service solutions. Combined with multi institution data sharing, these managed service and utility solutions have the potential to both reduce cost and improve quality.

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8. Technology trendsAcceleration in the development/use of more advanced technology solutions, particularly for transaction monitoring and data analytics. With skilled staff in short supply this is a business imperative. Many FinTech organisationswill either fall by the wayside or clarify what they can really offer and become part of the solution.

9. The role of sanctionsSanctions will continue to be used as a political tool, however, with the new US and other administration changes, the application is perhaps more uncertain. New enforcement bodies will also create a new dynamic in Europe. The need for financial institutions to focus on sanctions compliance remains key.

10. The need for greater operational effectivenessMore financial institutions joining the trend to re-engineer their anti-financial crime compliance and associated functions to help achieve greater operational effectiveness. Typical drivers include a desire to break down functional silos and have much clearer and more robust definitions of the respective roles and responsibilities of the first, second and third lines of defence.

PwC

AML /CTF key requirements and challenges

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PwC

Transparency is the new black…

National register of bank account holders and related parties

Beneficial Ownership Register

CRS Measures against tax fraud

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Transaction monitoring

Risk coverage (effectiveness)

Lack of understanding of risks

+ incomplete / poor data

+ poor feedback from investigations

= ineffective risk coverage

Operational cost (efficiency)

High volume of alerts

+ high false positive rates

+ long time to investigate

= high operational cost

When transaction monitoring to detect money laundering & counter terrorist funding first became a regulatory requirement for financial organisations, the technology was not mature and / or this was seen very much as a tick box exercise, this resulted in:

• Low cost options for solution implementation sought, because investment in a solution does not directly save money for the business and was seen as a direct cost overhead to the business

• Lack of investment in skilled resources to maintain the models and identify emerging threats for monitoring

• Solutions focused on raising of alerts and not on what it takes to investigate an alert

The impact of this is / was twofold…

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PwC

Outlook…

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PwC

New developments to be prepared for…

Global Regulatory Reach:

Extra-territoriality (OFAC, FCPA, UKBA, OFSI…)

Emerging Regulations:

Economic Sanctions, “5”th EU Directive AML

Threats Re-loaded:

e.g. Financing of Terrorism

New Technologies:

Blockchain, Bitcoin, and KYC utilities

Expectations of Authorities:

Forensic readiness, e-Discovery, transaction

monitoring, risk assessment

Tax is not relax:

CRS, Tax fraud

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Contacts

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this

publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this

publication, and, to the extent permitted by law, PricewaterhouseCoopers, Société coopérative, its members, employees and agents do not accept or assume any liability, responsibility or duty

of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2017 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of

PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Michael WeisFinancial Crime and Forensic Services Leader

2 rue Gerhard MercatorB.P. 1443, L-1014 Luxembourg

Telephone: +352 49 48 48 4153E-mail: [email protected]

overview on trends and developments - pwc · source: pwc global economic crime survey 2016 4...

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