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To identify the cause of banks’ rising operating costs, fingers are pointed in many directions. The capital constraints imposed by Basel III and the cost of adapting legacy systems to the increasingly real-time and digital expectations of end-users are often blamed.
There is a strong argument, however, for placing financial crime compliance high on the list of capital- and resource-intensive challenges for banks. For well over a decade, governments have introduced a broadening array of know-your-customer (KYC) and anti-money laundering (AML) checks to prevent criminal use of the global financial system. Over time, what started as the imposition of more paperwork at the account opening stage has rapidly ballooned to become almost an industry in its own right.
British Bankers’ Association research suggests most major international banks are spending between £700m and £1bn annually on financial crime compliance, and the fines imposed by governments for breaching sanctions or AML/KYC rules have reached into the billions for individual banks. According to the US Government Accountability Office, financial institutions were fined US$12 billion between 2009-2015 for violations of US AML and sanctions laws.
There is every reason to expect financial crime compliance requirements to continue to grow and evolve further in the coming decades. In a number of respects, the challenges of financial crime compliance bear comparison with banks’ other middle- and back-office headaches. Neither are regarded as significant sources of competitive advantage, but both can represent significant operational and reputational costs if executed incorrectly. Large-scale solutions may play a key role in lifting the compliance burden, but smaller, quicker steps can also make a big difference.
Solutions such as Taskize, enable compliance staff to collaborate on key tasks via a transparent, secure and auditable platform. This can improve speed and efficiency when dealing with transactions that raise compliance flags. Many alerts thrown out by sanctions screening systems or KYC/AML applications are false alarms, but many are borderline cases that may require discussion between team members and even between departments and organisations. This can lead to delays of days if not weeks as discussions are held across multiple parties and communications channels, with briefings and updates required at every level of escalation.
Such alerts can be resolved far more quickly and efficiently if all authorised parties – including clients if appropriate – can engage across a single customisable application that guarantees security through robust onboarding processes and encryption of interactions. Taskize provides such a platform, and offers real-time visibility on the status of individual transactions or cases. With the right tools, middle- and back-office staff can tackle compliance alerts and other transaction breaks or fails with the speed and accuracy of a pit crew – but at substantially lower cost.