FCA review finds weaknesses in challenger banks’ financial crime controls

A recent review conducted by the Financial Conduct Authority (FCA) has found that some challenger banks have significant weaknesses within their financial crime controls and need to improve how they assess financial crime risk.

The review, which was conducted during 2021, has revealed that, in some instances, challenger banks did not have financial crime risk assessments in place for their customers. It also identifies a rise in the number of Suspicious Activity Reports reported by challenger banks, in turn raising concerns about the adequacy of these banks’ checks when taking on new customers.

The review focused on challenger banks that were relatively new to the market and offered a quick and easy application process. This included six challenger retail banks, which primarily consist of digital banks, and covered over eight million customers.

The review did find some evidence of good practice, for example when it comes to the innovative use of technology to identify and verify customers at speed.

Financial crime controls need to be ramped up

Cyber crime on the rise

Sridhar Iyengar, managing director at Zoho Europe, commented: “Today, cyber crime and fraudulent activity is rapidly on the rise with more sophisticated episodes taking place all over the world. It’s no surprise that challenger banks are being impacted, but being able to verify customers at speed is no use if suspicious activity is being missed. As it stands, money launderers are still able to evade detection by capitalising on the shortfalls within a banks’ technological infrastructure.”

Iyengar continued: “There are many new features that can help make systems more secure or raise red flags early. Companies including banks can now benefit from the likes of Artificial Intelligence-based systems to help identify potential fraudulent activities. Immediate action can be taken and customers will remain sheltered from risk.”

Further, Iyengar stated: “In highly competitive markets such as banking, having modern IT systems in place can make a real difference in terms of providing business value and positively impact customer trust and the customer experience as a whole. For market challengers, this is even more important.”

The growing cyber risk, coupled with the growth of hybrid working, which can potentially add further security risks, makes it imperative for all businesses to assess their current IT systems.

Iyengar concluded: “Keeping operations secure, efficient and compliant with regulations is a different endeavour to what it was just a few years ago, and demands that all organisations modernise their IT systems such that the latter are fit for purpose in the post-COVID business landscape.”

Three-year strategy

Sarah Pritchard, executive director for markets at the FCA, said: “Our three-year strategy highlights our commitment to reducing and preventing financial crime. This is important in terms of creating confidence for consumers and market participants in financial services and in demonstrating that the UK is a safe place in which to do business.”

Pritchard concluded: “Challenger banks are an important part of the UK’s retail banking offer. However, there cannot be a trade-off between quick and easy account opening and robust financial crime controls. Challenger banks should consider the findings of this review and continue to enhance their own financial crime systems in order to prevent harm being done by criminals.”

BAE Systems launches “major update” to NetReveal platform for financial institutions

The latest version of BAE Systems’ NetReveal platform combines the best of advanced analytics and human expertise to enable financial institutions to effectively combat financial crime and fraud in an environment of rapidly evolving regulatory requirements and changing financial crime patterns.

Faced with increasing transactions, evolving regulations, a growing number of payment channels, customer friction, investigation challenges and strengthening privacy regimes, financial crime and fraud investigators are under pressure to make more confident and intelligence-led decisions and do so at an unprecedented pace.

Built on modernised modular technology, NetReveal addresses these challenges by working smarter and faster and supporting an intelligence-led approach:

Smarter: Profiling and detection against transactional data that commonly takes hours to process is now processed within 30 minutes (on average)

Faster: Advanced analytics with machine learning techniques improve operational performance by driving fewer false positives. Integrated Robotic Process Automation (RPA) means that routine tasks are automated, enabling investigators to focus more on high value strategic investigative work. The Real-Time Detection Engine helps institutions to keep pace with sophisticated criminals across growing digital channels

Intelligence-Led: Entity-based investigations deliver efficiency improvements of 20-30% on average by streamlining multiple detections into a single combined alert dashboard. Interactive lists also provide actionable information to adjudicate alerts effectively

Culmination of major investment

Rob Harrison, head of product and solutions for the financial services sector at BAE Systems Applied Intelligence, said: “This release is the culmination of major investment and engineering development of our financial crime platform and suite of solutions. We’ve focused on providing compliance and fraud teams with the latest advanced analytics, technology advancements and productivity improvements.”

Harrison added: “The latest version of NetReveal combines the best of human expertise and advanced analytics which we believe puts financial institutions in the strongest position possible to address the major market challenges of today, namely regulatory complexity and change, evolving fraud patterns, productivity and efficiency pressures and new risk management approaches.”

Julie Conroy, research director for the Aite Group’s Retail Banking practice, commented: “The use of RPA to improve financial crime operations significantly increases accuracy, reduces operational costs and enhances productivity. Given the growing data challenge, having the ability to advance investigator efficiency by reducing repetitive manual tasks, human error and, by extension, the number of false positives ultimately frees up time to focus on more strategic tasks.”

NetReveal is a single integrated platform for money laundering compliance and fraud prevention, enabling financial institutions to benefit from lower total cost of ownership across their compliance and fraud teams thanks to a single solution.

A comprehensive range of compliance and counter-fraud solutions can be deployed either individually or collectively.

Tackling Economic Crime Awards 2019: Call for Nominations

Entries are now open for the inaugural Tackling Economic Crime Awards (TECAs) organised by the World Excellence Awards team who also run the Outstanding Security Performance Awards (OSPAs).

The TECAs are independent and designed to acknowledge companies, initiatives, individuals and teams who have made an outstanding contribution to tackling economic crime, including any area of fraud, money laundering, bribery and corruption.

The awards are free to enter and open to anyone working in the UK and operating in the public, private or third sectors. 

 

Commenting on the TECAs, founder Professor Martin Gill CSyP said: “These awards are different. Judges are nominated by fraud specialist associations and groups and all of the leading ones are involved. The Judges mark to an ethics policy and there’s an ethical sponsorship policy in place, too.”   

The entry process is open until 1 August 2019. Nominations are now invited in the following categories:

* Outstanding Manager or Director

* Outstanding Team

* Outstanding Customer Service Initiative

* Outstanding Training Initiative

* Outstanding New Product

* Outstanding Training Initiative

* Outstanding Partnership

* Outstanding Investigator

* Outstanding Policing Initiative

* Outstanding Young Professional

* Outstanding Cyber Company

* Outstanding Female Professional

* Outstanding Prevention Initiative

* Lifetime Achievement Award 

Winners of the TECAs will be announced at a prestigious Awards Ceremony to be held on Monday 9 December at the Sheraton Grand Hotel on London’s Park Lane.

*Information on the nomination criteria and how to enter can be accessed online at www.thetecas.com

Borderpol appoints Peter Vincent as director counselor for International Policy

The Executive Committee of Borderpol is pleased to announce the appointment of Peter Vincent as the organisation’s director counselor for International Policy.

Thomas Tass, director general at Borderpol, commented: “We’re delighted to have Peter on board as he brings a wealth of experience to the organisation and will be invaluable in terms of improving our legal and regional representation in the Americas. He’s also a fluent Spanish speaker which will assist is with the aim of extending our reach into South America.”

Vincent told Risk UK: “I’m truly honoured and privileged to have been appointed as Borderpol’s director counselor for International Policy, I’ve long admired the organisation for the incredible work it does to balance counter-terrorism concerns with humane approaches to complicated border issues.”

Peter Vincent is the general counsel of Thomson Reuters Special Services LLC (TRSS), a US subsidiary of Thomson Reuters. Throughout his career, Vincent has served in a variety of senior executive and legal positions in both the public and private sectors.

Prior to joining TRSS in February this year, he was the principal legal advisor for the US Department of Homeland Security (DHS), US Immigration and Customs Enforcement (ICE). In addition, he served as ICE’s senior counselor for International Policy, whereupon Vincent advised the DHS Office of the Secretary and the ICE Office of the Director on issues relating to the formulation and execution of the agency’s international diplomatic engagement.

Peter Vincent

Prior to that, from November 2011 through until July 2013, Vincent served as the acting director of ICE’s Office of International Affairs (OIA), Homeland Security Investigations (HSI). With attachés in 75 offices across 48 countries, including seven combatant commands, HSI OIA is the largest international investigative component within DHS.

Working at the US Department of Justice

From November 2006 until May 2009, Vincent served with the US Department of Justice (DoJ) at the US Embassy in Bogotá, Colombia, first as the assistant judicial attaché and then as the judicial attaché. There, he advised the DoJ, the US Department of State, the US Department of Defence and various law enforcement and intelligence-gathering agencies on matters concerning extradition, terrorist organisations, money laundering, mutual legal assistance and narco-trafficking.

During his tenure at the US Embassy, Vincent co-ordinated nearly 500 extraditions to the United States, including the extradition requests for dozens of high-profile leaders of designated foreign terrorist organisations such as the Revolutionary Armed Forces of Colombia, the National Liberation Army and the United Self-Defense Forces of Colombia.

In July 2002, Vincent joined the National Security Litigation Team in ICE’s San Francisco Office of the Chief Counsel. As a trial attorney, he represented the Government in immigration proceedings involving terrorists and individuals who had provided material support to foreign terrorist organisations. In addition, Vincent advised the local Joint Terrorism Task Force on issues relating to counter-terrorism and foreign counter-intelligence.

Vincent graduated with High Distinction from the University of California at Berkeley with a Bachelor of Arts degree in Political Science and received a degree in law from the University of Virginia School of Law.