Financial Crime

How do Banks Tackle Financial Crimes? The Key Lies in Risk-Based Approach and Domain-Led Expertise

Businesses worldwide are undergoing a wave of disruption led by shifts in technology, mindset, and culture. Amid these upheavals, organizations need to rapidly evolve and reinvent themselves to tackle the various challenges.

Financial crimes – a menace affecting individuals, industries, and nations – pose one such colossal challenge for the banking and financial services industry. Rooted in nefarious acts like money laundering, systemic frauds, and terror funding, financial crimes are becoming increasingly sophisticated and layered by the day.

To curb the threats, regulations such as the Bank Secrecy Act (BSA) place an immense onus on financial institutions, obligating them to report suspicious transactions. Failure to comply with the law can impose a severe penalty on the financial institution, attract litigation, and result in loss of reputation and customers. According to a report published in, financial institutions were fined a whopping $2.7 billion in 2021 due to noncompliance with anti-money laundering regulations.

Considering the sizable risks of noncompliance, financial institutions need to take a “proactive” risk-based approach spanning the people, processes, and technology facets. Here’s how.

Safeguarding Financial Institutions Against Financial Crimes – The Imperative Actions

1. Risk-Based Planning

A well-laid plan is the crucial first step to tackling the potential risks emerging from the broad spectrum of financial crimes. The key lies in minimizing the scope of “unknown risks” and leveraging a documented, risk-based approach for effective protection and mitigation.

Several techniques and models are available to help banks manage their noncompliance risks comprehensively. However, domain-led expertise is highly recommended to guide the planning and deployment of risk management processes.

2. Preemptive Culture

Despite diligent planning, the “on the ground” risk mitigation response of an organization relies heavily on the mindset of its people. The people engaged in day-to-day operations in a banking and financial services company need to have a preemptive mindset and drive every action possible to tackle financial crimes. This might also need the people to go out of their ways and take individual ownership of tasks like tracking, reporting, compiling, etc., to ensure compliance.

A top-down cultural shift is a key to cultivating this preemptive mindset and percolating it across the organization.

3. Agile and Adaptive Approach

Given the rapidly evolving mechanics of financial crimes, financial institutions may find it impossible to determine and categorize all the risks in advance. Effective risk management, therefore, depends on agility and adaptiveness aside from rigorous “upfront” planning and preemptive culture.

Agile and adaptive risk management would need an optimal mix of process framework, trained workforce, and technology. This setup equips banking and financial services companies to predict potential threats in advance, detect suspicious transactions accurately and quickly, and respond with agility.

How Can Banks Tackle Financial Crimes? The Three Critical Aspects

Implementing compliance measures incurs costs, but, it ensures an ongoing safeguard against financial crimes and associated regulations, offering total peace of mind. Additionally, compliant institutions can generate a long-term value through increased brand recognition, customer goodwill, and market differentiation.

Meeting regulatory compliance includes the following crucial aspects:

1. Need to assess the entire threat landscape and applicable regulations

Several variables shape the compliance landscape for a bank or other financial institution. For example, geographical location, customer base, operational territories, applicable jurisdiction, type of product and customers, etc., can change the risk parameters and compliance obligations.

The risk management and compliance policy framework must account for all these factors to ensure that the policy and ensuing actions meet the requirements.

2. Importance of precise monitoring and reporting of transactions

The AML monitoring system should detect suspicious transactions precisely and do so in real-time. Also, the monitored database needs to have adequate integration with other details such as KYC, risk levels, historical activity, etc., to provide a complete and accurate picture.

Most importantly, the monitoring system should minimize the “false positives” to curb the risks of non-compliance and excessive operating costs.

3. Need to leverage domain specialists with hands-on experience

Specialists with deep, hands-on experience in deploying AML programs and systems within the banks’ existing policy framework are crucial to meeting compliance and thwarting financial crimes. The gamut of these experts could include AML consultants, system deployment professionals and associated IT specialists, and financial crime analysts.

In a Nutshell

Navigating the compliance maze successfully while serving trusted and delightful services is among the top priorities for banking and financial services. To attain these goals, financial firms need to constantly evolve their processes, people, and technology, ensuring they stay ahead of the curve, tackle financial crimes, and play competitively in the dynamic marketplace.

In this context, Digital Knowledge Operations (DKO) framework can play a pivotal role in helping financial service companies tackle financial crimes and meet compliance.

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Anaptyss Team

Anaptyss is a digital solutions specialist on a mission to simplify and democratize digital transformation for regional/super-regional banks, mortgages and commercial lenders, wealth and asset management firms, and other institutions. Its Digital Knowledge Operations™ framework integrates domain expertise, digital solutions, and operational excellence to drive the change.

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