effective use of technology in combating financial crime · importance of technology in combating...
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Effective use of technology in combating financial crime
David Choi and Matthew Russell
www.pwc.com/financialcrime
PwC
Introductions
David ChoiPartner, Financial Services Risk & Regulation (FSRR)
Matthew RussellDirector, Financial Services Risk & Regulation (FSRR)
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www.pwc.co.uk/fsrr
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Agenda
Section one – Why is technology important now?
Section two – What are the challenges?
Section three – Leveraging technology in combating financial crime
Section four – Identifying the keys to success
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Why is technology important now?
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March 2015
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Drivers for effective use of technology
Duration in which the world creates as much information as it did from the beginning of time
2 days2 days
Financial crime compliance is moving from policy and procedures to an operations and assurance level now
$ 10Bn$ 10BnTotal fines levied by US and UK regulators for breaches of AML and Sanctions regulations
P&P > OpsP&P > Ops
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Importance of technology in combating financial crime
Risk Management
• It is every banks goal to focus on doing the right thing and to shape effective strategies
Regulatory Demand
• The regulatory landscape is an ever shifting environment posing challenges to organisations who must comply
Cost Benefits
• Implementation of right technology to gain efficiencies and overcome implicit risk of non-compliance
Operational Excellence
• Application of principles, systems, and tools toward the sustainable improvement of
key performance metrics
Leveraging Technology
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What are regulators doing with technology?
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Technology touch-points throughout the customer lifecycle
1 2 3 4 5 6
eID&V
Scanning / Optical Character Recognition
Application Onboarding Product Usage
New Products
Cross Border Activity
Customer Exit
Sanctions, PEP & watchlistscreening
Transaction Monitoring
Negative news
screening
Federated searches
Analytics
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What are the challenges?
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Key challenges in leveraging technology
Choosing Solutions – What and how to implement?
Optimisation – Standardising processes and procedures
Data Privacy – Restrictions across jurisdictions and roles?
Cost Benefits– Justifying the use of advanced technology
People – Getting the right people to do the job
Data Quality – Processes and standards to ensure quality
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How can holistic insights be created across enterprise, geographies and business lines?
Retail Commercial Brokerage Private Bank
Internal and External Data Sources
AML Fraud Operational
Transaction Monitoring
Know Your Customer
Investigations and reporting
Governance and oversight
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What are emerging trends in compliance technology?
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Leveraging technology in combating financial crime
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March 2015
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Keys to effective correspondent banking transaction monitoring
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Source System 1
Source system 2
Source System 3
Transaction monitoring database
Aggregate data
SEGMENTATION
Segment A
Segment B
Segment C
Segment D
Segment E
MODELS
RULES
Scenario 1
Scenario 2
Scenario 3
Scenario 4
THRESHOLDS
Alert 1
Alert 2
Alert 3
Alert 4
RISKSCORING
Score 100
Score 90
Score 80
Score 70
Score 60
Score 50
Score 40
Score 30
Score 20
Score 10
Case Management
System
Data Completeness
and Data Quality
Geography Enrichment
Entity Consolidation
Pseudo-customer Segmentation
Threshold Tuning
Scenario Tuning
Alert Prioritisation Model
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How do we ensure data quality from all of these fields?
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A more targeted approach for higher risk products or segments
Risk Assessment
Jurisdictional Risk Product Risk Customer Risk
Model Governance
Optimisation
Screening
Watchlist
Sanctions
Negative News
Transaction and Activity Monitoring
Case Management
Onboarding
Know Your Customer
Customer Due
Diligence
Enhanced Due
Diligence
Segmentation
Risk Scoring
Validation
Financial Crime Intelligence
InvestigationsAnalytics
Data Scientists
Statisticians
Data Modellers
Compliance
Investigators
Enforcement
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Proactive and agile targeted reviews: Identify emerging risks and quickly mobilise teams to investigate potential risks
Connecting the dots: Pulling together information across siloes (e.g., across different business units and countries)
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How can analytics help uncover typologies and hidden networks?
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What type of resources and skills are required in financial crime compliance that wasn't needed
before?
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Onboarding and customer risk assessment
Product Risk
Geographic Risk
Business Type Risk
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Effective model governance
Federated searches to automate triggers
Enhancement of underlying data sources, including use of Optical Character Recognition and link analysis (e.g. Trade Finance)
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What is a financial crime model and what validation is being applied?
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Biometrics adoption
Biometrics
‘Finger vein’ readers to circumvent cloned fingerprints
Voice recognition software deployed across call centres
Finger print authentication for mobile banking apps
Uniquely identifying customers
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What future technologies will present threats or opportunities to financial crime prevention?
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Identifying the keys to success
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March 2015
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What are the keys to success?
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The keys to the successful leveraging of technology
Effective Solutions – Selecting the right technology
Optimisation – Continual improvement of solutions
Data Privacy – Understand and work within constraints
Cost Benefits – Demonstrate benefit from tactical activities
People – Combine technical skills with industry knowledge
Data Quality –Augmentation and effective capture of data
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Questions?
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Contact details
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David Choi7 More London Riverside,London, SE1 2RTUnited Kingdom
T: +44 (0) 2072121809M: +44 (0) [email protected]
David ChoiPartner, Financial Services Risk & Regulation
Matthew Russell1 Embankment PlaceLondon, WC2N 6RHUnited Kingdom
T: +44 (0) 20 780 44227M: +44 (0) 7803 [email protected]
Matthew RussellDirector, Financial Services Risk & Regulation
www.pwc.com/financialcrime
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