Banks may face increased fraud risks as economic turmoil deepens

Peter Dinham
Wednesday, 25 March 2009 21:32

IT Industry - Deals

“Furthermore, cost-cutting pressures may affect AML/anti-fraud departments, among others. Indeed, some banks have already announced budget and staff reductions.”

Knapik said the growing adoption of a risk-based approach to counter financial crime issues was driving the implementation of advanced deviation detection and risk measurement techniques through the use of technology. To date the major focus had been on automation of existing methods and business processes.
 
“However, these days the focus has shifted towards accuracy. Of 194 banks surveyed globally, 64% indicated that currently the top investment priority is technology that provides effective monitoring and detection capabilities with high alert accuracy. All these factors enable banks to move from a reactive stance to a more proactive approach by focusing human resources to deal with the highest risk cases.”

Datamonitor report that since the emergence of the first significant wave of financial crime detection and prevention programs, costs have far exceeded expectations, and besides the technology expenditure, the total cost of experienced technical and non-technical compliance and anti-fraud experts has significantly increased.

The survey found that the cost was quite often spread over many different business functions, such as operations, compliance, risk and security, and may also overlap with processes that are embedded in regular business practices, such as payment processing or credit risk analysis.

As such, Datamonitor found, banks may be unable to hold a single unified view of all the associated costs related to anti-money laundering or anti-fraud activities, preventing them from making efficient decisions regarding how best to direct their resources to focus on the major areas at risk of financial crime.
 
Knapik concluded that there was a growing opportunity for business and technology consultants or vendors that could improve a bank’s understanding of the full range of anti-financial crime related processes which existed across the entire organisation, and further implement all the necessary enhancements to the existing process.