Compliance as a shared public service?

Anti Money Laundering (AML) Compliance does not give a bank competitive advantage, yet it continues to consume growing amounts of financial and human capital.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

When you consider that financial criminals seek out the weakest link in the financial system, being the best is worthless if your counterparty is the worst.

Is it time for the UK banking industry and regulators to embrace a collective approach? If so, we need only look to the EU for examples.

Why intelligence-sharing utilities?

Intelligence-sharing utilities offer some game-changing benefits to the UK financial system. Shared services are typically employed as a cost-reduction strategy, but the benefits to investing in a compliance utility are deeper than cost alone.

  1. Pooling resources across multiple organizations. Concentrating the resources deployed, including funding, human resources, and intellectual capital, increasing scale and quality beyond the reach of any single organisation.
  2. Driving a new standard by enabling banks to share best-in-class knowledge and expertise amongst themselves, allowing banks of any size to achieve the same as their larger peers.
  3. Higher fidelity results by pooling data across multiple banks. Shared compliance utilities can provide a more comprehensive and accurate picture of activity across the financial system.

There are several examples of intelligence sharing utilities emerging in mainland Europe seeking to realise these benefits. Below are two examples from the Low Countries.

TMNL: Transaction Monitoring Nederland is a data and analytics utility formed under the governance of the Dutch Bankers Association. TMNL provides a centralized database of customer data supported by five Dutch banks.

DISCAI: is a fintech from Belgium which uses artificial intelligence and machine learning to supply compliance processes as a service. DISCAI was spun out of KBC, who partnered with KPMG to bring the product to market.

Building an intelligence-sharing utility is hugely challenging. The experience of TMNL, where the Dutch parliament had to change the law to enable data sharing, gives an indication of the scale of challenge and support required to address these challenges.

Common challenges

  1. Establishing a shared anti-financial crime utility requires trust and cooperation between banks. Banks are naturally reluctant to share data with their competitors, especially customer data.
  2. Ensuring data security and privacy. Banks must be confident that their sensitive customer data is secure and protected from unauthorised access. Ensuring robust controls where data is only available on a limited-needs basis.
  3. Overcoming legal hurdles that protect data across the globe. It’s not unusual for privacy and crime prevention laws to be in tension, leading to compliance paralysis. This is a complex problem in a single geography, which gets even harder when working across jurisdictions.
  4. Establishing common standards for compliance monitoring and reporting is critical to the success of a shared compliance utility. However, achieving consensus on these standards is easier said than done.

These challenges are well known across the banking industry, but most solutions are framed in a single organisation or geography. How these issues can be tackled across organisations and country borders to produce a shared utility will be examined in a later blog for UK Finance from us.