Tackling the growing threat of financial crime through technology

Written By: Stephen Ingledew  –  2 min read

Rosemary Gallagher speaks to LexisNexis Risk Solutions about protecting businesses and people from scammers set on financial exploitation

Financial crime is a growing issue for businesses and their customers alike, and it looks set to intensify as scammers target vulnerable people during the ongoing cost of living crisis, according to experts. This means that financial institutions of all sizes need to ensure they have effective and compliant measures in place to protect against criminal activity.

And, as financial crime and fraud increases, it is becoming more expensive and time-consuming to meet regulations that protect corporations and consumers.

The 2021 Cutting the Cost of AML Compliance report by LexisNexis® Risk Solutions, a global data and analytics company, found that UK banks are spending almost £30 billion on complying with anti-money laundering regulations. Surveying over 300 financial services firms across the sector, the report found that people-related costs were dominating compliance budgets. Some 70 per cent was spent on hiring, training, and retaining staff and just under 25 per cent was spent on technology, including systems, solutions and data.

Another piece of research by LexisNexis® Risk Solutions revealed that 43 per cent of financial services organisations expect the cost of living crisis to increase the risk of financial fraud in the coming months as scammers target vulnerable consumers struggling with rising bills. Its report highlighted a concern that criminals are outpacing efforts to protect banks and their customers. It emerged that around a third of financial services organisations believe anti-fraud and financial crime systems are not keeping up with criminal techniques.

Such concerns are echoed by industry trade body UK Finance. In its recent half-year report, it said that as so much fraud comes from criminal activity through online and technology platforms, there is a need for greater cross-sector action to tackle the problem at source.

Chris Foye, market planning director at LexisNexis® Risk Solutions, says: “Various pieces of research show the scale of the financial crime problem, including money laundering, within the UK. And we’ve seen a trend over several years of the cost of compliance increasing.

“What I found particularly interesting in our most recent report on financial crime compliance was that the cost burden for companies seems to centre on people, particularly employment and training, rather than technology. That’s partly down to the regulatory landscape becoming increasingly complex, which creates more compliance work.”

Alongside complicated regulations and threats of enforcement, Foye explains that businesses are under pressure internally to “onboard” customers quickly to realise revenue. “These competing forces are quite sizable,” he adds. “Companies need to follow a Know Your Client (KYC) process, gather evidence, such as a passport and driving licence, to verify identity and check things like sanctions lists. This often means multiple integrations with various vendors and databases which takes time. They also have to do checks against internal systems and look at the overall risk profile, for example if people are applying for several products.”

Foye points out that choosing vendors to work with on compliance can be a long process for businesses, starting from research to engagement to implementation and maintenance. If a financial services organisation is looking to enter new markets, they often have to find more vendors to work with. “Businesses see themselves repeating this cycle,” adds Foye.

Rather than this ongoing process of finding multiple vendors, LexisNexis® Risk Solutions says it helps organisations meet their compliance needs by offering a “next generation fraud and financial crime management” orchestration platform capable of providing a single view of risk.

Its orchestration solution, recognised by global technological research and consulting firm, Gartner, makes the risk management of digital interactions more efficient and less costly. It removes the need to have several different integrations from a number of vendors. Furthermore, LexisNexis® Risk Solutions’ research found that financial services firms already realise the need to invest more in orchestration technology to improve customer outcomes and two thirds (69%) plan to increase investment in technology over the next 12 months.

Foye says: “Our orchestration solution provides our customers with the ability to bring outputs from different verification checks onto a single platform. It takes things to another level and writes to a single audit trail which is incredibly important within compliance.”

To conclude, LexisNexis® Risk Solutions described its research findings as “an encouraging glimpse at the near future of financial crime compliance. A harmonious blend of sophisticated technology that cuts out all the menial, repetitive tasks associated with KYC, whilst being flexible, allowing organisations to stay compliant and enabling humans to do what they’re best at – rational, cognitive analysis and horizon scanning”.