RiskTech Forum

Chartis & EY: Tackling Financial Crime Through Integrated Risk And Compliance

Posted: 2 March 2015  |  Source: Chartis


Leading financial institutions (FIs) are rethinking their organizational structures to manage financial crime risk more effectively. The integration and alignment of risk and compliance functions will be crucial if the financial services sector is to address the broader sources of financial crime risk and tightening regulation to which it is exposed today.

FIs are becoming exposed to increasingly sophisticated techniques used by organized criminals, who target vulnerabilities that are opening up as large volumes of customers perform multiple transactions across multiple channels. Cyber threats are one part of the equation, but FIs are grappling with criminals who often target a number of different internal and external channels. In addition, they must monitor traders, sanctions and watch-lists, and deal with the
proliferating numbers of smaller financial crimes, all the while managing tightened budgets.

At the same time, the sector is facing a significant compliance burden as regulation of its practices continues to tighten, and as customers and investors demand greater transparency and integrity from financial dealings. The introduction of the Foreign Account Tax Compliance Act (FATCA) in the US this year – as well as the subsequent intergovernmental agreements (IGA) to follow – is just one such signal of international intent to make FIs more accountable for risk and compliance management on behalf of their customers. In addition, the operational costs of financial crime risk management are rising: the monitoring of the multitude of channels is proving to be increasingly expensive for firms in terms of expertise and the establishment of Financial Crime Risk Management (FCRM) Systems.

There have been several recent cases of large FIs being fined by regulators and reproached in the media for failures in their anti-money laundering (AML) and sanctions monitoring controls, too. Given that such financial crime is fundamental to the operations of terrorists, drug traffickers and corrupt political regimes, FIs simply cannot afford to risk the reputational damage inflicted by such compliance failures.

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