Preventing crime through collaboration and integration

Teiss guest blogger Andrew Davies, from fintech services provider Fiserv, argues that a holistic customer view combined with collaborative teamwork is the key to an effective cyber crime prevention strategy.

Instances of financial crime are become increasingly frequent. Over 75 cyber attacks were reported to the Financial Conduct Authority (FCA) in the UK in 2016 compared to just five reports in 2014. The challenges of managing and combatting financial crime risk are becoming more and more difficult.

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The costs associated with a fraudulent attack can often be more than the theft itself. Stolen funds need to be recovered, and there may well be fines from the FCA. Statistics from CEB TowerGroup show that fines from financial crime have increased by 55,000% over the past 10 years as attacks have become more common, and the sums much greater.

In order to tackle financial crime and lessen the impact of fraudulent attacks, organisations need to ensure that they have the correct infrastructure in place. Anti-Money Laundering (AML), Know Your Customer (KYC) and fraud prevention solutions are all key to reducing and managing financial crime risk. However, knowing which one to invest the most in can prove difficult. Financial crime is becoming increasingly unpredictable.

Financial Institutions (FIs) need to implement prevention strategies and share resources between teams so that comprehensive customer profiles can be created. These profiles can make a huge difference when identifying unusual behaviour that indicate money laundering, tax evasion, elder abuse, human trafficking or fraud.  Such an approach helps reduce the investment required to manage financial crime risk whilst enabling more accurate detection and remediation of any anomalies.

CEB Towers found that only 14% of FI fraud departments have a complete customer-centric view. This shows how much more work needs to be done to get more organisations to share valuable KYC and AML data. Customer-centric solutions help organisations manage risk and also enable them to stay ahead of competition. If an organisation does not understand their customer fully, it is impossible to understand the risk associated with them.

When static and dynamic customer data is managed correctly, FIs can build up comprehensive customer profiles which can be combined with data collected from consortia of FIs. This can enable organisations to differentiate between what could be crime and what is just a slightly unusual transaction, providing greater accuracy in uncovering that which is worthy of further investigation. With more accurate detection we see greater operational efficiency.

Benefits of a customer-centric view

The way that customers, both retail and commercial, manage their money is constantly changing. They want access to their financial assets through multiple channels and across multiple devices, whenever and wherever it suits them. FIs need to gather data on every aspect of their customers' behaviour no matter how they choose to interact with their institution. Cross-divisional collaboration ensures that thorough customer profiles can be compiled, with threats identified more quickly and acted upon more efficiently.

Traditionally AML and fraud prevention teams have been siloed, with each team gathering information on customers separately. However, research has shown that there is an 80% overlap in AML and fraud detection tools and processes. This  clearly demonstrates the effectiveness of leveraging these assets across multiple groups to make financial crime risk management and prevention more effective and reliable.

Through collaboration and the integration of assets and processes, teams can leverage data more efficiently. For example fraudulent behaviour is more likely to be recognised in time to prevent it, with reduced losses and no negative impact on customers. Being able to work together allows a comprehensive KYC risk management strategy to be created and ensures that suspicious behaviour is detected.

Now more than ever, a common infrastructure that displays customer-level risk data at an FI level is essential if institutions are to pinpoint and tackle increasingly sophisticated criminal activity.

The key to success

FIs often have a rich pool of data covering customer behaviour which they can leverage, and often this data is included in systems like the FI's AML system. The richer this pool of data, the more informed and valuable the analysis of the data, in particular the value of analytic models, becomes.

Adding data from consortia allows institutions to build a detailed picture of customer behaviour across entire industry segments. This comprehensive understanding of customers ensures that organisations can recognise and flag unusual behaviour, with for example fraud being detected accurately and more immediately. In addition, it also helps FIs understand when a transaction follows typical customer behaviour. This prevents the unnecessary halting of legitimate transactions which leads to damaging customer experiences.

It is important to recognise that there cannot be a 'one-size fits all' mentality. Integrating assets and data needs strong management to make sure that anomaly detection systems are versatile and to allow AML and fraud teams to see problems in their entirety. The progressive renovation of systems ensures that KYC data is up-to-date, flexible and constantly in action. This attitude and implementation approach acknowledges the necessity for converged data to make sure that organisations fully understand the customer and can manage financial crime across all channels.

As criminals become more sophisticated, FIs must make sure they are in a position to combat financial crime as efficiently as possible. By collaborating and integrating solutions across an organisation, data can be shared to provide a complete picture of the customer and flag unusual behaviour in real-time.

Adding an additional layer of security with consortium data makes collaboration between teams even more valuable. FIs need to implement a holistic approach to tackling financial crime that looks at consortium data, alongside the customer profiles to identify and resolve issues as quick and effectively as possible. Implementing a robust risk management strategy means FIs can be more effective at crime prevention, leading to reduced losses and a positive experience for customers.


Twitter: @Fiserv

Andrew Davies is vice president, global market strategy, Financial Crime Risk Management solutions at Fiserv. He works with Fiserv customers around the world to design effective risk management solutions to mitigate financial crime risks. He is also responsible for seeking new markets and applications for Fiserv’s financial crime detection and prevention solutions.

Davies joined Fiserv in 2007. He has worked in the software industry for more than twenty years supporting many of the world’s largest financial institutions. His experience covers real-time payments, front-office trading, risk mitigation of financial crime risk, settlement risk, and more.

Davies studied Pure Mathematics and Computer Science at the University of Wales. He is a Certified Anti-Money Laundering Specialist and has worked with customers in the Americas, Europe and Asia. He is a respected industry speaker and author having presented at SIBOS and ABA events and contributed to articles in the American Banker and Credit Union Journal, among other publications.

 

 

 

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