AML Regulation in 2014: The New Culture of Compliance. Webinar Participant Poll Results. Copyright 2016 NICE Actimize. All rights reserved.

Transcription

1 AML Regulation in 2014: The New Culture of Compliance Webinar Participant Poll Results

2 TABLE OF CONTENTS Overview... 3 Polling Methodology & Respondent Demographics... 3 Key Findings... 4 Area of Greatest Concern... 4 Data Management is Increasingly Critical... 6 Customer Risk Assessment Drivers... 7 Is Compliance Truly Pervasive?... 8 Enterprise-Wide Compliance is Critical... 9 Actimize Integrated Anti-Money Laundering Management... 9 ABOUT NICE ACTIMIZE... 10

3 Overview The importance of developing a culture of compliance within financial institutions has been a much-talked about topic for many years, encouraging banks and other obligated institutions to make AML compliance part-andparcel of their day-to-day business processes. The current industry environment of increasing compliance needs and regulatory scrutiny is now bringing the need for a strong culture of compliance to the forefront once again. Regulatory agencies are focusing on this culture and how deeply it permeates the entire organization in the same way that customer service, employee ethics or company profitably do. AML regulations and guidance have grown over the years, expanding not just within established industry segments, but also to new and emerging segments to provide coverage against risk of money laundering abuse across the broad and complex global financial system. Despite the increased focus on money laundering prevention, individuals and organizations attempting to launder funds have become experts in exploiting weaknesses in AML strategies. Polling Methodology & Respondent Demographics To better understand the AML compliance challenges facing financial institutions, as well as how these firms are adapting to the everevolving landscape and adopting a true culture of compliance, NICE Actimize conducted a number of polls of participating financial services firms in a Spring 2014 Webinar on AML Regulation in 2014: The New Culture of Compliance. 422 individuals from more than 300 financial services firms participated in the webinar, with more than half representing large, global organizations Webinar participants represented 17 different countries; after the United States, the United Kingdom and Canada represented the largest number of participants An average of 225 responses were received for each question All percentages have been rounded to whole numbers In this climate of both increased compliance and exploitation, regulatory scrutiny has become the norm, changing the ways in which financial institutions must evolve in order to remain compliant. The constantly changing landscape due to new money laundering schemes, new technologies, and new regulations and guidance makes for a complex web of moving parts that the AML compliance professional must manage.

4 Key Findings The poll results show that attendees recognize the importance of a culture of compliance within their financial institutions and the criticality of identifying gaps in their AML strategies in order to truly manage the complexity of today s AML compliance environment. The main findings include: 47 percent of the responding financial institutions rated identifying gaps in their overall anti-money laundering strategy as their most pressing concern for the next 6 to 12 months. 75 percent expect that significant, or at least some, operational changes have or will be implemented to improve the quality of data and information gathering at their organizations. Only two percent of respondents replied that products and services requested by customers are not taken into consideration when assessing AML risk while 98 percent indicated that risk assessment is either based on profile or that product usage may affect risk assessment. Fewer than 50 percent of respondents believe their organizations have a strong culture of compliance; 29 percent indicated their belief that AML compliance at their financial institution was expected to change considerably or to some extent while 22 percent acknowledge that their culture of compliance could use improvement. No participant indicated that no changes were needed. Area of Greatest Concern To gain insight on the AML challenges and focus of financial institutions, poll respondents were asked to indicate their greatest AML concerns for the next six to 12 months with regards to sanctions, strategy, and model risk management requirements. 47 percent of the responding financial institutions rated identifying gaps in their overall anti-money laundering strategy as their most pressing concern for the next 6 to 12 months. Additionally, about 23 percent of the respondents cited model risk governance and model risk management requirements as another area for continued attention, followed by the desire of about 18 percent to avoid regulator-imposed sanctions. About 12 percent of the survey s respondents cited that being held personally responsible for non-compliant activities was something they d be thinking about over the coming year. What are your greatest AML concerns for the next 6-12 months (select all that apply)? Addressing model risk governance & model risk management requirements Identifying gaps in an overall AML strategy Being held personally responsible for noncompliant activities Avoiding regulator imposed sanctions 12% 18% 23% 47% 0% 10% 20% 30% 40% 50%

5 Prioritization of these concerns is very indicative of the regulatory focus on the need for a culture of compliance within financial institutions. As regulators have become more sophisticated, their capabilities for identifying gaps and seeking remediation have increased, putting firms at greater risk for non-compliance. Regulators are now looking for both empowerment and accountability and financial institutions must communicate AML compliance roles to customer-facing employees with the same vigor and emphasis that has traditionally been delivered to back office teams. Financial institutions must clearly focus on closing the gaps in their AML compliance strategies and ensuring employees at all levels embrace this new culture of compliance to avoid being penalized for inadequate AML compliance controls.

6 Data Management is Increasingly Critical In order to respond to regulatory requirements, AML compliance departments are coming up with new data requirements to create a better picture of their customers and their activities. To gain insight into the level of focus on data management, participants were asked about their data and information gathering activities and any changes that might be forthcoming. 75 percent of respondents answered that they expect significant, or at least some operational changes have or will be implemented to improve the quality of data and information gathering at their organizations. Are there operational changes taking place within your firm in order to improve the quality of data/information gathering? Significant changes implemented or expected 35% The response regarding operational changes to improve data management is very supportive of financial institutions positioning that they need to create a better picture of their customers and their activities in order to respond to regulatory requirements. Much of this begins with improving, or at least maintaining, current data quality while striving for improved customer assessments and risk scoring through the aggregation of additional data from previously untapped or under-utilized sources. Many financial institutions are also consolidating the data they have available from a multitude of data sources, so as to create greater efficiencies in how that data is accessed, analyzed, and delivered for decision-making purposes, reporting, etc. As organizations continue to consolidate and improve overall data management, they must remember that data accuracy and quality is as critical as data gathering in order to maximize decision making and avoid non-compliance. Some changes implemented 40% Not to any significant degree but changes expected Not to any significant degree and not expected 7% 18% 0% 10% 20% 30% 40% 50%

7 Customer Risk Assessment Drivers As financial institutions seek to retain existing customers and gain new ones, the products and services being offered can be crucial to this effort. At the same time, the question exists as to whether or not customer risk profiles are being assessed in the context of the products and services that are both requested and utilized by this customer base. Participants were asked the extent to which products and services contribute to customer risk assessment within their financial institutions. As financial institutions seek to retain existing customers and gain new ones, the products and services being offered can be crucial to this effort. At the same time, the question exists as to whether or not customer risk profiles are being assessed Are the products and services utilized/requested by customers part of the customer risk assessment? (select all that apply) AML risk assessment is based on profile 34% AML risk assessment is based on usage 26% May affect the customer AML risk assessment 37% Not taken into consideration when assessing AML risk 2% 0% 10% 20% 30% 40%

8 Is Compliance Truly Pervasive? It is easy to believe, based on recent events in the marketplace, that there is no such thing as a culture of compliance in the financial industry; more sanctions, larger fines, and individual accountability are all common headlines. The response by forty eight percent poll participants, that their financial institution currently has a strong culture of compliance, shows a disconnect between respondent views and the current reality of compliance in the industry. Twenty-nine percent of respondents indicated their belief that AML compliance at their financial institution was expected to change considerably or to some extent and the remaining 22 percent acknowledged that their culture of compliance could use improvement. No participants indicated that they expect no changes to their compliance programs. Regardless of where a financial institution feels they stand with regards to their AML compliance program, it is worthwhile to question and double down on compliance efforts enterprise wide. Firms must not only ensure that they are strong with regards to compliance, but must also validate that strength. The bottom line is that organizations should fully integrate AML compliance and work to resolve money laundering issues so that banks and financial institutions can get on with the business of banking. Regulators are openly encouraging a culture of compliance and failure to adapt by these financial institutions will only increase their regulatory pain. How would you characterize the AML Culture of Compliance within your financial institution? 8% 21% 48% 22% A strong compliance culture Could use improvement I expect no changes to compliance I expect change to some degree I expect compliance to change considerably

9 Enterprise-Wide Compliance is Critical As regulators push for a new culture of compliance with fewer gaps within AML programs, financial institutions are finding the value in an enterprise-wide compliance approach. This may seem a daunting task, but financial institutions can begin by working with the systems that they already have in place, rather than starting from scratch to achieve enterprise wide compliance. It is important to identify operational and technical synergies with existing processes and to find opportunities to align with the processes being used within other lines of business. For example, many institutions have already begun leveraging synergies between existing AML processes, by aligning customer due diligence (particularly from the risk assessment standpoint) with transaction monitoring systems. This creates improved processes on both sides of these processes as behavior influences profile and profile influences monitoring levels. Some institutions have also begun utilizing these same behavior and profile analytics to change the way the financial institution carries out customer relationship management, focusing not only on identifying risky relationships, but also on opportunities to grow their relationships with good customers. Modern AML compliance systems align technology and capabilities required for end-toend business management of the AML lifecycle. As financial institutions look to build synergies, they should look to leverage data available within the AML compliance department, as well as within other lines of business, and look for opportunities to consolidate technology, operational processes, and resources. Actimize Integrated Anti- Money Laundering Management Actimize s AML solution suite enables integrated AML management while delivering insight across the customer lifecycle to ensure smart and cost-effective AML operations for a positive, holistic customer experience. The packaged offerings across retail and correspondent banking, securities, and insurance, enable financial institutions to support an enterprise-wide approach to compliance and: Fully integrate AML solutions and disciplines, such as know-yourcustomer, transaction monitoring, and sanctions screening. Combine core behavior detection technologies, open analytics and business rules with proven process and procedures, sharing workflow, case management, audit and reporting filing features and functions. Use a single technology platform across AML compliance needs, leveraging a common infrastructure and unified data model for high performance analytics. Utilize a central case management system to unify the output from disparate systems and to take into consideration the entire customer lifecycle.

10 ABOUT NICE ACTIMIZE NICE Actimize is the largest and broadest provider of financial crime, risk and compliance solutions for regional and global financial institutions, as well as government regulators. Consistently ranked as number one in the space, NICE Actimize experts apply innovative technology to protect institutions and safeguard consumers and investors assets by identifying financial crime, preventing fraud and providing regulatory compliance. The company provides real-time, cross-channel fraud prevention, anti-money laundering detection, and trading surveillance solutions that address such concerns as payment fraud, cybercrime, sanctions monitoring, market abuse, customer due diligence and insider trading. Copyright 2016 Actimize Ltd. All rights reserved. No legal or accounting advice is provided hereunder and any discussion of regulatory compliance is purely illustrative. linkedin.com/company/actimize 01MAY14 AML POLL Culture