Synectics Solutions and UK Finance recently broadcast a webinar as part of their joint Economic Crime Academy series that explored the opportunities for developing a single customer view of financial risk to help reduce the cost of financial crime and regulatory compliance. Initial questions amongst webinar participants showed that most (75 per cent) were struggling to develop this capability while agreeing that such a solution would be incredibly useful to help reduce financial crime and fraud, plus drive down the cost of regulatory compliance.

Indeed, the challenge of combating financial crime, balancing their approach to regulatory compliance while still remaining commercially effective is a conundrum that all major banks and financial institutions are finding difficult to solve. In a low interest marketplace, constantly having to increase investment in risk mitigation or remediation processes bites ever harder into profits.

Recent compliance benchmarking surveys by McKinsey and Thomson Reuters, suggest that as much as 0.4 per cent of revenue is being invested in various forms of financial crime prevention and regulatory compliance.

In a large UK bank, that amounts to over a billion pounds worth of investment each year -  with 90 per cent of that cost being made in people to help deliver a comprehensive risk mitigation solution that keeps them afloat.

However, the Thomson Reuters survey also suggests that despite this constant investment, 61 per cent of organisations questioned anticipated that these costs will continue to rise, due to the increasing cost of recruiting and retaining this body of expertise within their organisations.

It comes as no surprise then that organisations have a long way to go to harmonise their compliance and enterprise risk efforts to avoid the multitude of manual processes, duplication of effort and questionable levels of accuracy in their attempts to defend against financial crime - and comply with the shifting sands of the regulatory burden.

The stakes are also getting higher, as the impact of financial crime reaches industrial proportions and the fines for regulatory breaches reach billions of pounds.

With some of the larger financial organisations having as many as 30 different teams taking part in financial crime risk management, it might seem like an impossible (and costly) investment to harmonise such a disparate and complex web - and even more of a pipe-dream to achieve an effective integration of compliance and enterprise risk. However, it is an ambition that many large organisations are now starting to investigate further.

The good news is that by providing organisations with a common data model capable of accommodating a wide variety of intelligence and bringing that intelligence into a common framework, it may be less costly than many perceive - especially given the significant financial benefits at stake.  

During the webinar, Synectics, Dow Jones and UK Finance discussed how organisations could consider harmonising their organisational financial crime risk strategy by combining data models across their organisation and introducing a cloud-based, more sophisticated use of technology to create a single customer view of risk that could:

• Reduce the need to manage multiple systems
• Reduce the amount of manual processes
• Add layers of machine learning and artificial intelligence to reduce inaccuracies
• Take advantage of networked data to supplement intelligence
• Improve the ability to board new customers without delays
• Monitor for high risk events and conduct remediation relating to existing customers in near real time
   

Over 23 per cent of participants agreed that cost reduction was actually the biggest benefit of investing in this type of solution, along with improving AML (20per cent) and fraud prevention capabilities (25 per cent).  

By far the biggest challenge is for organisations to stop working in silos and start to adopt an organisation-wide approach. Additionally, better use of technology and a more efficient method of exploiting third-party intelligence are areas where major gains can be made.

Synectics is working with Dow Jones and other data providers to address these issues. The aim is to create a cloud-based, multi-layered approach to address financial crime and regulatory compliance that will enable organisations to cost effectively deliver on that promise of a single customer view of risk.  

Adopting such an approach will lead organisations to finally feel that they have a firm grasp on compliance and can start to turn the tide of combatting financial crime more effectively. 

From the feedback on the webinar, this is an area that UK Finance members are starting to investigate to address these issues - one that need not be as costly or unachievable as one might think.