RiskTech Forum

Chartis: From compliance to proactive financial crime risk management

Posted: 9 January 2015  |  Author: Philip Mackenzie  |  Source: Chartis


Regulatory fines for money laundering and financial crime violations have increased dramatically in recent years, including multi-billion dollar fines for sanctions monitoring and money laundering. The most stringent demands are coming from the United States and the UK.

Financial crime risk management (FCRM) is not merely a regulatory issue. Huge numbers of high-frequency, low cost fraud attacks have been enabled by the dissemination and anonymization of information technologies. In addition, a new breed of cyber-criminal, with knowledge of banking structures and how to exploit them, is creating unprecedented high-impact, low-frequency losses. In order to detect criminals whose activities are increasingly spread across borders, risk types and business lines, siloed FCRM systems are no longer sufficient. 

Financial institutions must therefore decide whether to patch their old systems, or to invest in more integrated enterprise FCRM platforms. The costs of breaking silos and data cleansing are becoming prohibitive, particularly for the largest financial institutions, and so they are increasingly using middleware, alignment, overlays and data abstraction layers to draw their FCRM systems together.

Transparency in FCRM systems is key, because regulators and firms are no longer satisfied with black box solutions. Evidence must be provided with regards to data lineage and model validation.

The ability to process new forms of information ( including unstructured data) is enabling new fraud, security and AML defenses which are being built around open-source intelligence, geolocation and network analysis.

Advanced analytics can then bring together this information into multi-dimensional views of customers and counterparties across business lines and borders, enabling the creation of centralized financial crime intelligence units (FIUs), and proactive FCRM. 

Chartis recently published its 2014 update report for Financial Crime Risk Management Systems. To obtain the report please click here.