We recently partnered with UK Finance to deliver a webinar on why collaboration in the financial services industry is critical to addressing financial crime. Our expert, Sam Haskins summarises his key messages from the session.
The private and public sectors’ ability to manage financial crime risk depends on closer and more innovative collaboration between investigative, prosecutorial and regulatory bodies and financial institutions. For all four, it’s time to take new approaches.
The role of the NECC
Enabling this sort of collaboration will need leadership and vision from the National Economic Crime Centre (NECC). Although it won’t feature a data-sharing hub immediately, such a function will hopefully be one of its ambitions. But to meet its aims, the NECC will have to make existing tools work more efficiently and lead a wider discussion on innovative approaches that will increase the system’s overall effectiveness.
Coordinating the use of technologies against financial crime will be critical. The NECC should draw on the experience of other organisations that have explored innovative approaches to data-driven financial crime supervision and enforcement.
The role of incumbent financial institutions
Incumbent financial institutions have the experience in financial crime risk management. But they need to collaborate with FinTechs to use innovative technology and data analytics to develop new approaches to managing financial crime risks.
As financial institutions and FinTechs do this, they should work with the NECC to agree what data to share and what technology should pool and analyse it.
The challenge for financial institutions will be showing a strong business case for the extra spending this will need. We believe the key to that case is to see anti-financial crime technology as an investment in innovation with a wide range of benefits: from lower compliance risk to an improved cost/income ratio and a better reputation.
The role of the regulator
Regulators must continue to enforce penalties and offer incentives to drive the desired behaviours. But they must also embrace the challenge of addressing market inefficiencies. This means finding ways to drive shared ownership of problems and rewarding collaborative solutions while giving the clarity and support needed to overcome data privacy and jurisdictional regulatory differences. We’ve published research on how regulators will need to re-invent themselves in order to regulate more effectively in a fast-changing world – and find new approaches to things like rewarding collaborative solutions.
Regulators should also revisit the financial crime controls themselves. It seems highly unlikely that today’s verification and evaluation processes will continue to be adequate to manage a fragmented financial services market.
Collaboration is key
As the financial services industry becomes more complex, with new competitors and technologies creating more customer touchpoints, collaboration is increasingly crucial. While the NECC, incumbent financial institutions and regulators have individual responsibilities, none can deliver against them in isolation. They must come together to create new approaches to managing financial crime risk.