In the past, many firms felt powerless to prevent financial crime and simply wrote it off as the cost of doing business. In the last two decades, however, the combination of greater regulatory pressure and the increased costs of financial crime to firms have led to financial crime management becoming a much higher priority for firms.

In particular, regulators have put increased pressure on firms to do more to prevent terrorism financing, money laundering, corruption, and tax evasion. As these requirements have become stricter and the volume of transactions has increased, it has become ever more difficult for firms’ financial crime management systems to meet these requirements. The cost of failure has gone up, through higher regulatory fines and increased public scrutiny leading to greater reputational risk.

Firms need to adapt to this new world. In the past, they had focused on processing a relatively small number of transactions, on a batch basis, and accounts could be fairly easily traced. However, the rise of mobile and online banking has raised the volume of transactions, the speed at which they take place, and the ease of anonymity. These  factors  mean  that  firms  need  new  approaches  and  technology  systems  for  their  anti-money  laundering,  anti-corruption,  anti-terrorism  financing,  economic  sanctions,  and  tax  evasion  programs.

The widening of regulatory scope has also increased the volume of transactions and accounts that need to be screened. This will place increased pressure on resources in organizations that rely on manual review and workflow  processes,  creating  much  higher  costs,  much  lower  efficiency,  and  greater  operational  risk.  To  process  greater  flows  of  information,  firms  will  need  technology  solutions  that  have  been  specifically  designed  to  meet  current and future challenges of screening processes, providing the right balance of feature sophistication and high-volume processing ability.

As  financial  crime  techniques  evolve  rapidly,  state-of-the-art  detection  techniques  with  sophisticated  filtering  are necessary, with powerful, scalable screening abilities to enable the processing speed that operations require. Firms also want to avoid overwhelming volumes alerts generated by increased screening volumes. To meet the  new  filtering  volumes,  refined  and  flexible  tuning  of  rules  is  required  to  minimize  false  positives  and  maintain  manageable  alert  rates.  Solutions  also  need  a  rapid  ‘production  mode’  to  eliminate  false  alerts  quickly,  while providing deeper investigation tools for potential true alerts. Automation of predictable steps should be considered, such as decision reapplication or routing alerts directly to the most appropriate reviewer.

This often  means  focusing  on  best-of-breed  solutions,  rather  than  ‘one-stop-shops’.  While  many  firms  want  to  improve  their  overall  financial  crime  systems,  they  know  from  experience  that  broad  implementations  are  costly  and  take  time.  Where  firms  have  a  specific  need  for  improved  screening,  a  specialized  screening  tool,  with  focused development of real-time scalable capabilities, may be preferable to a one-stop-shop vendor with less sophisticated screening capabilities.

This  report  covers  the  technology  capabilities  and  systems  that  firms  need  to  adapt  to  this  changing  environment,  with  a  focus  on  watch-list  filtering  systems.  The  report  covers  new  functionalities  that  firms  need  to  implement  to keep pace with technology changes and regulatory requirements, including real-time capabilities, risk-based approaches, and the ability to increase scale. This report also covers practices and technology solutions available from FircoSoft,  a  provider  of  watch-list  filtering  solutions.  Chartis  believes  FircoSoft  to  be  one  of  the  leading  vendors  in  the  financial  crime  management  marketplace.

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