Financial institutions and regulators are in a constant battle against financial criminals who seem to be always a step ahead. The IMF has estimated that global money laundering amounts to 2% to 5% of global GDP, which translates to $2 trillion to $5 trillion based on current figures, with only a fraction of the illicit funds being seized. This puts immense pressure on compliance and operations professionals who are struggling to manage multiple priorities, including the risk of severe financial losses, penalties and fines, operational disruption, and damage to reputation.
Not surprisingly, a recent study by Corporate Compliance Insights revealed significant hurdles to getting the job done. Of his 240 compliance officers surveyed across industries, countries and job levels, 53% said they lacked the resources to perform their jobs to the best of their ability, and 40% said their organization lacked Lacking support, 59% feel burned out. Working in compliance and operations is a tough way to make a living and the road ahead is certainly not easy.
Speaking directly with senior leaders across the financial services industry, there are several themes that have emerged as concerns in the fight against financial crime.
Unclear decision-making power
KYC/AML operations have too many cooks in the kitchen, with first-line, second-line, and risk management partners often sitting in the middle. Teams are often not clear about who makes the final decisions regarding priorities and risk acceptance. Operations focus on innovation and BAU, while Compliance focuses on identifying multiple data recovery opportunities. Who makes the final decisions about what the team prioritizes?
Outdated technology and manual processes
Disconnected systems, lack of automated due diligence and verification methods, and email document/information exchange top the list of concerns. Existing teams controlling the precise transfer of data inputs from one system to another, transactions monitoring false positive rates over 95%, or regularly working with the client to collect KYC data points and his 20 Imagine an operations person exchanging the above e-mails. This is a reality for many companies and negatively impacts data quality, efficiency and customer experience. It also leaves skilled employees underutilized and distracted from error-prone, repetitive and mundane tasks. All this is very expensive. Fenergo’s 2022 survey (of 1,055 corporate bank executives) revealed that 72% of respondents estimated the cost of his KYC to be between $1,000 and $3,000 per client.
Internal competition for resources
Every compliance officer wants the majority of available resources to be applied to compliance efforts, but business leaders allocate budgets to drive business growth and stay ahead of the compliance curve is needed. Important initiatives often feel overlooked, yet resources are dedicated to fighting fires and responding to the latest crises and remediation projects. Leaders must make impossible decisions, keeping one group above water while preparing others for future MRAs, consent orders, or poor customer experience that threatens market share I can. A key risk facing many institutions today is the inability to drive innovation across functional groups while responding to business as usual and necessary corrections.
Overloaded team
Those who keep the engine running are becoming increasingly demotivated, stressed and anxious in relation to the workload and the support they receive from the organization. They often work in siled teams and create inefficiencies through handoffs, ineffective communication, and the traditional “check the box” approach. Additional data points from the Corporate Compliance Insights Survey noted above show that 51% of compliance officers reported feeling “significant” or “extreme” work-related stress, and 56% said their role impacted their mental health. It indicates that you feel that you are being adversely affected.
“Compliance and operations professionals are straining to juggle multiple priorities.”
In order to tackle the challenges presented by financial crime, senior compliance and operations officers must take decisive action to ensure the effectiveness of financial crime programs. Here are five steps that can be taken to achieve this goal:
- Clarify Roles and Responsibilities: One effective way to get everyone on the same page is to engage all key stakeholders in running an updated RACI (Responsibility, Accountability, Consultation, and Information) exercise. This exercise can help clarify roles and responsibilities across first and second-line functions, enabling faster and more effective decision-making. By resolving ambiguity in real-time, teams can keep strategic plans on track while addressing challenges.
- Leverage Data Analysis: By analyzing volume trends associated with key KYC/AML processes over time, it is possible to identify opportunities for process improvements and technology enhancements. However, problems that cause volume spikes or drops can span entire groups, requiring collaboration and coordinated problem-solving. Senior executive leadership needs to break down silos and synchronize efforts across the team to solve the most pressing problems.
- Review and Streamline Processes: In order to streamline processes and build a multi-year technology roadmap, it is important to review the KYC/AML process map in detail with key stakeholders. Pain points and potential resolutions should be documented, and compliance and audit partners should be included in this exercise to ensure a one-team approach to reducing risk while increasing efficiency. By partnering with companies that specialize in client life cycle tools, it is possible to create a seamless client experience that begins with digital document exchange and automated workflows to capture and validate data.
- Build Effective Partnerships: To maintain strong business-as-usual performance while improving technology, processes, and governance, it is important to build partnerships with companies that can help achieve these goals. This requires the ability to identify shortfalls and adjust resources as needed, in order to keep strategic plans on track without being compromised by unforeseen challenges.
- Connect Efforts to Higher Mission: Anti-money laundering efforts must respond to a higher mission and purpose. Senior management needs to talk about illicit money-generating activities and their impact on society. By ensuring that their organization and roles are structured to contribute to the prevention and detection of financial crime, AML teams can evolve from “checking the box” to truly adaptive problem-solving. Collaboration must evolve across domains and perimeters, with a focus on the true values of the AML team.
By collaborating to build a stronger AML community, we can unlock tremendous potential for the future. In today’s world, financial crime is an ongoing and pervasive threat, and it’s critical to work with partners to ensure that you have access to the necessary resources and expertise. Whether you are seeking thought leadership, insights on how to improve program effectiveness, or resources to improve speed and quality, we are committed to maximizing your impact and delivering benefits to your organization and the broader global community. By reducing your risk and enhancing your AML capabilities, we can help you stay ahead of the curve. Get in touch with us today to learn more about how we can support you.
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