Financial Crime Risk Management

Of the many vulnerabilities and threats to the financial services sector, financial crime risk has emerged as a pervasive, yet widely misunderstood category of risk. As consumers, governments, and the financial industry have gained familiarity with various forms of financial crime, financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages) have seen that the underlying risk of financial crimes not only includes the direct action taken by criminals (and fraud perpetrators), but also includes the impact of deterrence, detection, and resolution on the organization and its customers. A financial crime is a regulatory, reputational,

Financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages) have the difficult task of effectively identifying the greatest risks to themselves and to their customers, protecting both parties against unnecessary risks and satisfying regulatory requirements for greater transparency, awareness, and consolidation of information across the organization. For many such organizations, this challenge is compounded by a stagnant or even shrinking budget allocation, making these tasks even more daunting. Financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages) are increasingly realizing that they must move beyond the traditional reactive

The initial phase in the lifecycle of financial crime risk deals with threats that have not yet affected the institution; this can be thought of as the programs and activities to halt any suspicious or non-compliant activities before they become an issue. For financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages), many of these activities require a great deal of resources and insight into customers that may not be available or easy to aggregate. These examples highlight the complexity of prevention and associated risks: (a) Stopping suspicious persons from opening accounts or moving

The next phase in the financial crime risk lifecycle involves identifying and responding to threats that are active or ongoing. Effectively handling these types of risks requires both accuracy and speed, as a few seconds mean the difference between stopping a criminal act or suffering the effects of a financial or data loss, compliance violation, or major customer disruption. Financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages) have acquired and built a myriad of systems and sensors to monitor for specific events and types of behavior; however, the many technologies lack the wider

The last phase of financial crime risk is often the most overlooked, but it underpins the entire financial crime risk lifecycle. While prevention and detection each deal with types of risks, investigation encompasses how those risks are handled and resolved once they have been identified. Intuitively, the necessity of this step in the overall lifecycle makes sense; however, the often unnoticed aspect is how essential the manner in which issues are discovered and decisioned affects the institution in terms of both risk and cost. Highlighting how different effective resolution and investigation of risks can be from traditional, often human-driven analysis

Financial services organizations (e.g. banks, investment banks, insurance companies, credit card companies and stock brokerages) should look beyond end-point solutions and investment in individual functional areas and instead build an effective and comprehensive Financial Crime Risk Management (FCRM) program that espouses the following characteristics: Holistic: Gaining transparency and a greater view of risk by connecting data and systems across disparate groups, channels, and silos is essential to identifying potential risks and ongoing threats to the institution. Shrinking such gaps directly translates into reduced risk to your organization and customers and in time will deter criminals looking for easy targets. End-To-End: