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As firms prepare for ISO 20022’s November 2022 SWIFT and April 2023 CHAPS go-lives, the remaining quarter of this year is critical. Now is not the time to down tools.
Having supported the inception and rollout of ISO 20022, we predict that by end 2023 over 90 per cent of the world’s high value financial transactions will use the new standard. ISO 20022 will introduce standardisation, structure, and greater richness in payments data, and become the de facto international standard for payments messaging and reporting.
However, while firms focus on technical readiness, not enough consideration has been given to the downstream impact on financial crime (FC) controls.
Ready your organisation and your systems
Many firms have prioritised core systems updates to support ISO data processing but robust readiness extends beyond system changes. Firms need to ensure full organisational readiness.
All impacted staff across first and second lines need to understand the impact of ISO 20022 for their role. By providing targeted training for affected personnel, you can educate staff on how ISO 20022 impacts their responsibilities as risk owners and stewards. Operating procedures also need to be updated to reflect the new standard. Without these critical updates, significant knowledge will be lost when the current message types are turned off in 2025.
Improve risk mitigation across all financial crime controls
Having guided several international direct participant banks to develop CHAPS readiness plans, we found that payments data is not always effectively used within FC screening and monitoring.
Yes, screening tools will be updated to capture and process ISO payment files, but FC controls relating to money laundering, sanctions evasion and fraud must be updated to use additional payment information for improved risk mitigation.
Three key areas firms should be exploring:
The devil is in the data
Additional data within payment messages could create further benefits for firms, leading to significant operational efficiencies and more effective cross-checking against customer risk profiles. This will ultimately feed into perpetual KYC models and enrich standard and periodic CDD processes.
More enriched and accurate payment information allows firms to understand customer spending patterns and trends, providing intuitive analysis. Through AI adoption and use of Natural Language Processing (NLP), ‘predicting’ customers’ financial requirements will become a closer reality.
ISO data is richer and more accurate but that does not automatically translate into more effective financial crime risk management. Firms must challenge whether they are effectively checking customers’ risk profiles, improving KYC models, and capitalising on the additional insights which ISO brings. An ISO 20022 health check can help FC teams explore the advantages of the new standard. The time to explore these opportunities is now.
12.10.22
Mark Kane, Payments Expert, PA Consulting
Madhav Manek , Financial Crime Expert, PA Consulting
08.12.22
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