A Digital Goldmine!

This week, the European Central Bank, in its push for supervisory technology, stated that “national bank regulators must adapt to lenders increasingly embracing advances in technology, saying doing so could help supervisors gain a quicker understanding of risks to the sector.” The push comes amidst a growing recognition that adopting new technology can enhance the effectiveness and efficiency of BSA/AML compliance programs. In fact, earlier this month, Singapore and Australia both announced multi-million-dollar grants towards the development of regulatory technology in order to accelerate technology adoption in the financial sector. And for an industry historically resistant to disruption by technology, fearing regulatory scrutiny, the time is ripe to embrace the advances in technology.  

With global payments experiencing a 37% increase since September, compliance programs are looking to adjust resources to deal with the potential rise in money laundering alerts and reviews. This comes after a year, in which investigators felt that financial crime caseload productivity stagnated or worsened due to the pandemic. The combination of Covid-related fraud and remote work has also seen a staggering 84% of financial crime investigators suggest that their compliance programs have become less effective. Yet, as the pandemic has pushed general society towards digital adoption, it has demonstrated to employers that embracing technological innovation in the workplace can actually result in greater efficiencies. And the same can be said for compliance programs, where failure to comply with ever-increasing regulations is not an option.

According to SWIFT, the AML space is one, in which it believes that “there’s plenty of scope for new solutions to speed up the information gathering process,” as “analysts spend as much as 80% of their time finding data instead of fixing problems.” Part of the problem, besides outdated systems/tools, is that industry is “swamped with data, much of which has little meaning attached to it,” according to the Global Head of Sales and Relationship Management at SocGen. They went on to suggest that regulatory technology will help institutions move away from “the concept of ‘big data’ and towards ‘smart data’,” thereby allowing it to have “a more meaningful view on the data itself [and enables] financial institutions to exploit the data that is being requested by regulators in a much more intelligent way,” especially when integrated into their systems. In fact, according to a recent best practices publication by the Hong Kong financial regulator, a financial institution’s “AML/CFT systems should support integration of information and data from external sources as a means to enhance the targeting and mitigation of specific ML/TF risks."

Utilizing regtech in a shift from ‘big data,’ institutions now have the ability to efficiently surface, across a variety of data, the kinds of actionable insights that result in a more effective fight against financial crime, whether from the improved utility of regulatory reporting to improved law enforcement outcomes - a win-win for all involved!

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