SAN JOSE, Calif., Sept. 11, 2019 /PRNewswire/ --
Highlights:
- Only one quarter of retail banks have adopted an integrated
approach to financial crime systems, but active collaboration
between functions is now the norm
- Two-thirds of banks take a strategic approach to integration,
driven by detection and scalability benefits, in addition to cost
synergies
- 72% of banks are looking to get integration synergies and the
majority are seeking to do so within three years
A new independent survey by research firm
Ovum, on behalf of global analytic software firm FICO, has found
that most banks plan to integrate their fraud and financial crime
compliance systems and activities in response to new criminal
threats and punishing fines, with the U.K. leading the pack.
Responses show that U.S. systems are less integrated than
Canada's – only 25 percent of U.S.
banks have a common reporting line for both fraud and compliance,
versus 60 percent for Canada.
More information:
https://www.fico.com/en/latest-thinking/ebook/usa-banking-survey-2019
The survey also found that 72% of U.S. banks surveyed have
strategic plans for further integration. Worldwide, 71% of banks
across the regions surveyed have integration strategies, to either
fully integrate functions or share resources where synergies exist
with the U.K. leading the way, followed closely by the U.S.
These goals are driven by considerations both financial and
strategic: Since the 2008 financial crisis, regulatory fines for
the global banking industry for compliance breaches related to
compliance or sanctions failures now total more than $28 billion (all figures USD), with some single
fines as high as $8.9 billion.
However, this regulatory 'stick' is only one driver for banks to
tackle financial crime — banks also wish to protect their customers
and themselves.
"Banks are asking a fundamental question: Is the current
approach to tackling financial crime sustainable or should they
seek a more integrated approach between fraud and anti-money
laundering (AML) compliance?" said TJ Horan, vice president of
fraud solutions at FICO. "U.S. banks are all too familiar with the
challenges presented by a disconnected approach, but struggle to
manage high workload volumes and ensure detection rates are
high."
Though the world's banks appear united in their pursuit of
integration, FICO's survey found significant differences between
approaches among the ten countries studied.
Top pain points in meeting financial crime compliance
objectives
Rank
|
U.S.
|
Rest of
World
|
1
|
45%: Ensuring
detection rates are high
|
42%: High levels of
false positives
|
2
|
42%: Managing
increasing levels of alerts
|
38%: Ensuring
detection rates are high
|
3
|
36% (tie):
Disconnected approach to
managing financial crime; Managing high
workload volumes due to defensive
approach (e.g. SAR filings)
|
35% (tie): Managing
high workload volumes due to
defensive approach (e.g. SAR filings); Speed in
responding to new financial crime threats
|
Main technology-related challenges for anti-financial
crime
Rank
|
U.S.
|
Rest of
World
|
1
|
48% (tie):
Performance of technology
platforms; Cost of technology systems
|
47%: Performance of
technology platforms
|
2
|
39%: Use of multiple
systems across
operational processes
|
43%: Use of multiple
systems across operational
processes
|
3
|
38%: Low integration
between
technology systems
|
38% (tie): Speed to
change technology systems;
Ability to support management reporting
|
Current level of integration between fraud and financial
crime compliance functions
Rank
|
U.S.
|
U.K.
|
All
Respondents
|
1
|
Data: 27% very
integrated
|
Investigation systems
–
53% very integrated
|
Data: 29% very
integrated
|
2
|
Investigation
systems: 24%
very integrated (tie)
|
Detection systems –
35%
very integrated
|
Investigation
systems: 28% very
integrated
|
3
|
Controls: 24% very
integrated
(tie)
|
Controls – 25%
very
integrated
|
Controls: 25% very
integrated
|
U.S. banks reported lower levels of integration than their U.K.
counterparts in six out of seven areas. Even at their highest
levels of integration, data and investigation systems, just over
half of U.K. banks said their fraud and financial crime compliance
systems were very integrated. Worldwide, it's clear the banking
industry has only started the process of bringing these functions
closer together.
Ambitions for integration between fraud and AML compliance
functions
Goal
|
U.S.
|
U.K.
|
All
|
Strategic plan to
fully integrate functions
|
24%
|
47%
|
29%
|
Strategic plans to
share resources where synergies exist
|
48%
|
35%
|
42%
|
Tactical approach to
sharing resources where synergies exist, with
active drive for this
|
12%
|
12%
|
15%
|
Tactical approach to
sharing resources where synergies exist, but no
active drive for this
|
15%
|
6%
|
11%
|
No plans for
integration
|
0%
|
0%
|
3%
|
Most respondents received high marks when it came to strategic
planning, with most having strategic plans to either fully
integrate their functions or share resources where synergies
exist.
"Convergence is a hot trend in the fraud and financial crime
compliance space," Horan said. "Overall, our survey shows that
banks are moving in this direction, though the U.S. is further
behind than most countries surveyed."
Ovum surveyed over 100 retail banks on their priorities,
challenges, and plans for financial crime, looking to assess the
maturity of the sector in tackling financial crime, and ambitions
towards integration. In addition to the U.S., Canada, and the U.K., respondents came from
South Africa, Scandinavia,
Germany, and Austria.
About FICO
FICO (NYSE: FICO) powers decisions that help people and
businesses around the world prosper. Founded in 1956 and based in
Silicon Valley, the company is a pioneer in the use of predictive
analytics and data science to improve operational decisions. FICO
holds more than 195 US and foreign patents on technologies that
increase profitability, customer satisfaction and growth for
businesses in financial services, telecommunications, health care,
retail and many other industries. Using FICO solutions, businesses
in more than 100 countries do everything from protecting 2.6
billion payment cards from fraud, to helping people get credit, to
ensuring that millions of airplanes and rental cars are in the
right place at the right time. Learn more at
http://www.fico.com
FICO is a registered trademark of Fair Isaac Corporation in the
U.S. and other countries.
About Ovum
Ovum is a market-leading data, research, and consulting business
focused on helping digital service providers, technology companies,
and enterprise decision-makers thrive in the connected digital
economy.
Through our 150 analysts worldwide, we offer expert analysis and
strategic insight across the IT, telecoms, and media
industries.
We create business advantage for our customers by providing
actionable insight to support business planning, product
development, and go-to-market initiatives.
Our unique combination of authoritative data, market analysis,
and vertical industry expertise is designed to empower
decision-making, helping our clients to profit from new
technologies and capitalize on evolving business models.
Ovum is part of Informa Tech, a B2B information services
business serving the technology, media, and telecoms sector. The
Informa group is listed on the London Stock Exchange. Find out more
via: ovum.informa.com
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SOURCE FICO