Anti-Fraud and Anti-Money Laundering in Banking- The Common Denominators
We have been hearing from multiple banks on their plans to align the anti-fraud and anti-money laundering efforts within their organizations. Over the past few
We have been hearing from multiple banks on their plans to align the anti-fraud and anti-money laundering efforts within their organizations. Over the past few years we have seen many manifestations of sophisticated fraudsters and money launderers across the globe which is what is making the bankers re-think their strategy and execution to curb these attempts. Clearly fraud risk and money laundering risk are the key containment areas for operational risk management with in a bank and implications of these two are similar from perspectives of legal risks, reputational risks and financial losses.
The need for real-time fraud monitoring of banking transactions across the enterprise is well established and many banks are catching up to move from traditional methods to advanced real-time fraud monitoring systems. But many banks are still living with the old generation anti-money laundering systems which only can perform offline transaction monitoring by taking the transaction data from core systems offline or in batch mode. Also, there is a lacuna with these systems from the perspective of agility and flexibility for changes required, with the changing times and the regulatory mandates.
Need for real-time transaction monitoring in AML capabilities
With the advancements in operational systems and technology for faster, rather, real-time payments & remittances and the rise of multi-channel banking, the money launderers of this age need less than an hour or few hours at the maximum to complete the three key steps of money laundering process: Placement –placing the illegal money into the system; Layering – separating the illegal money from the source through a series of transactions and making it difficult to trace the origin; and Integration- converting the illegal money to legitimate form. This accentuates the need for real-time monitoring capabilities for detection of suspicious transactions and effectively combating money launderers. Majority of the banks across the globe are not well-equipped with real-time suspicious transaction monitoring in their AML systems and this is one area banks need to gear up.
Here are the key aspects of alignment of anti-fraud and anti-money laundering efforts in a bank
Operational Processes and people: Both anti-fraud and anti-money laundering departments of the bank need dedicated investigated teams who investigate each case/alert that systems generate based on the severity level and category of the alert as per the defined processes of the bank. The nature the business has become such that these investigation teams need to operate on a continuous basis and even 24/7 depending on how the fraud processes are configured. Both these teams need similar investigation tools for completing the investigation workflows and finding the evidences in order to resolve cases. It makes sense for the banks to optimize the efforts of investigation teams by having combined AML and fraud investigation under single umbrella.
IT Platform: Real-time transaction monitoring, integrated case management and comprehensive investigation workbench are the common basic build blocks of both fraud management and anti-money laundering systems. If the both fraud management and AML can be done using a single platform bank will have huge benefits in terms of the capital and operational expenditure leading to significant benefits total cost of ownership (TCO).
Data: Data Integration is one challenging area for banks. Both fraud management and AML systems need the integration with the same host systems (core banking system, credit cards etc. ) for the corresponding transactional data and master data. If there is a single platform, that can handle real-time integration with host systems for getting the events from the host systems and use the same both fraud management and AML purposes, this could be hugely beneficial for the bank.
With the need for sophisticated fraud detection capabilities and current state of out-dated AML system many banks have, combined Real-time Enterprise Fraud Management and AML platform is an idea whose time has come. Few banks have already begun their journey on this front and we expect more banks to join the bandwagon.
How do you envision your anti-fraud and anti-money efforts at your bank? Do let us know your views- we’d love to know.
Find the truth about your Customers, yourself!
In an age where even scientific discoveries are turning out to be unreliable, scientists, of course state that these are “self correcting” and therefore in
In an age where even scientific discoveries are turning out to be unreliable, scientists, of course state that these are “self correcting” and therefore in the long run, the truth shall prevail, businesses have something to worry about, mainly so because they need to take quick decisions based on the information they have available today and cannot wait till a more “accurate” version of the truth arrives tomorrow. To take a parallel in the medicine industry, many times wrong diagnosis has harmed businesses more than wrong strategy.
Here are a few reasons why research goes wrong in today’s world:
An interconnected world allows access to analysis in one part of the world, everywhere else. However conditions and assumptions underlying the analysis may not apply to your case
Hype about new media, like Facebook, Twitter and Mobile forces advertisers and marketers to embrace these channels so that they can brag about the logos. However, the ROI for the same may not justify the effort depending on how frequently decision makers in your segment access these channels
More data, more complexity – news gatherers try to hide the complexity of findings and analyses in simple terms, so that content is easy to read and generates more page views. However, only getting to the source of the content would tell the reader about the constraints and assumptions as well as the statistical probabilities observed
Terminology – different terms mean different things in the same language with the same industry. For example, a “savings account” could mean an fixed term deposit in the UK, whereas it means an interest earning demand deposit in India. An analyst reading about trends in savings accounts could make wrong interpretations owing to this
In summary, either
the third party research does not mean what you think it does, or
it isn’t relevant in your context, or
it works – and if it does, it’s more likely a fluke that’s not guaranteed to provide repeatable results
The solution?
do your own research
implement strategy based on this research
implement a feedback loop that proves / disproves your hypothesis
rinse and repeat
In the banking industry, it is more important than ever to not rely on trends, news sources and so called “independent” studies that are not validated for your customers, your business environment and your products based on your own data.
If you are a leading bank, you already have a huge amount of transaction data ready to be mined in real time. To find out how you can perform your own research to retain valued customers and maximize revenue, contact CustomerXPs at clari5@customerxps.com.
By Alok Kumar
Alok Kumar is Product Line Engineering Manager at CustomerXPs
He can be reached at clari5@customerxps.com
CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.
Five ways Banks can ensure annus horribilis for Customer Experience in 2014!
1. Offer to downgrade: Banks can bombard the best customers with offers to downgrade their status. For example, they can get the relationship manager to call
1. Offer to downgrade: Banks can bombard the best customers with offers to downgrade their status. For example, they can get the relationship manager to call the platinum card holder and offer her to issue a silver credit card.
2. Cross sell irrelevant products: Its relatively easy doing this. Run the algorithm on a customer relationship and identify the least fit product. The teller can than try to cross sell it to the unsuspecting customer. A new low can be achieved by wrong-timing the pitch. Example: Offer a car loan at a cheaper rate to customer who purchased car last week.
3. Antipathetic complaint redressal mechanism: There are more than one ways to do it. Make customers jump through hoops to reach the customer care executives. Refuse to acknowledge that the problem exists. Get customers to start over every time they want to check the status. Cross sell irrelevant products when the customers call to complain.
4. Commoditize the customer: Converting the customer from individual to a commodity has monopoly rule at the pinnacle of horrible customer experience. One sentence that really does the trick is,” we deal with hundreds of customer like you.”
5. Continue with antiquated processes: After all, old is gold. Continuation with antiquated processes will ensure that customers have to fill forms in triplicate and visit multiple counters for each transaction. Then cross sell irrelevant products to them.
From the days when customer experience management was more titular than operational, today its closely correlates with lower customer attrition and better financial results for the banks. Hopefully, the banks will endeavor to avoid the above 5 mistakes thus achieving superior results.
Ratnesh is Head of Marketing at CustomerXPs.
He can be reached at clari5@customerxps.com
CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.
