Financial Crime Risk, Regulation & Compliance Insights for Organisations

From data to action: strategies for tackling financial crime in the UK 

AML KYC Team
04.07.2024 Published: 04.07.24, Modified: 04.07.2024 12:07:00

The UK loses a staggering £8.3 billion each year to financial crime, the government’s Economic Crime Survey (ECS) has revealed. This is the first report of its kind to shed light on the scope and scale of this scourge and its impact on the economy. This will guide our response to this unfavourable state of affairs and help us collaborate with businesses to tailor prevention and protection for different sectors.

Financial crime covers a broad gambit including payment fraud, identity theft, money laundering and more. According to Pierre-Antoine Boulat, FDM North America Delivery Lead for Risk, Regulation & Compliance, ‘An arm’s race between money launderers on the one hand, financial compliance and law enforcement on the other is all but certain.’

Most organisations have little interest in regulatory projects except under constraints including

deadlines and scope.

At FDM we are conscious that regulatory change is constant, but that pace and quality of realisation vary. We believe that building, but importantly also maintaining permanent market and operation-ready skills matters for successful firms.

To lead the conversation on financial crime prevention and explore the main challenges of implementing effective KYC capabilities, we held an interactive event at our London office: Powering the people behind risk management and anti-financial crime: a winning practice.

The event included panel discussions on the importance of data strategy; remediation plans and beyond. It featured SMEs and industry leaders across financial services.

Our expert panellists discussed:

  • The benefit of new technologies and the imperative of acquiring the right skillsets
  • Whether programmes are data led or data informed
  • Developing new consultant mindsets to combine Data Analytics and Risk Management
  • The cost of regulatory change and ad-hoc remediations
  • How FDM’s Model Office FIS and Skills Lab can turn execution/remediation plans into solutions for tomorrow

Here are some of the key takeaways:

Executive summary

Our cross-practice approach to solving client problems overall is adaptable to every change in financial services, (not just Risk, Regulation and Compliance) and FDM is in a prime position to offer a complete consultancy solution framework;

  • Industry bottom-line problem

The biggest cost of change is catching it too late (up to 40% banking strategic investment in some areas).

  • Regulators requirement

Firms now need to demonstrate how they acquire appropriate competency levels and reflect ongoing learning as part of the control levels.

  • Client problems

Need practitioners with holistic experience (Data, Risk, Regulation, Compliance, Change & Transformation) combined with niche skillsets and appropriate mindsets. This is in addition to technology-orientated consultants for the heavy IT lifting.

  • Remediation is “the solution for tomorrow”

FDM has proven experience in equipping data analytics consultants (and beyond: Business Systems Analysts, Data Engineers, AI specialists) with AML/KYC and Risk Management experience.

FDM demonstrated its capability as a delivery partner, with continuous feedback improvement, holistic workforce that is adaptable to the evolving requirement, ability to “data improve for clients to self-service” and reverse engineer client process.

‘To be an effective RRC expert, you must understand data’

In today’s fast-paced regulatory environment, understanding and leveraging data has become essential for effective decision-making and operational efficiency. According to Garth Newboult, Principal Consultant at FDM, one of the biggest challenges for organisations today is the time it takes to understand data and make fast decisions based on it.

The Benefit of New Technologies vs. Acquiring the Right Skillsets

As companies invest in new technology, it’s critical to recognise that technology alone won’t solve the problem. The real value lies in understanding the data sources and addressing inaccuracies to respond effectively in a regulatory environment.

At FDM, data underpins all our practices and our Skills Lab. Whether it be from a Software Engineering angle, Change & Transformation, IT Operations, Data & Analytics or Risk, Regulation & Compliance, our consultants start off in data first. We prioritise their understanding of data before turning to regulatory knowledge, focusing on identifying and rectifying data inaccuracies to drive meaningful outcomes.

Data-Led vs. Data-Informed Programmes

The discussion moved to a consideration of whether organisations would adopt a data led vs. data-informed approach to remediation. The general consensus was that programmes should be both data-led, where data drives decision-making processes, and data-informed, where data supports decisions made through other insights. At FDM, we advocate for a balanced approach where clean, structured data supports and leads strategic initiatives. This balance ensures that organisations can leverage data for predictive analytics, enhancing both compliance and operational efficiency.

The New Consultant: Data Analytics Specialist vs. Data Analytics and Fin Crime Risk Expert 

The increasing use of automation means more transitional financial crime specialists migrate towards data analysis and take new skills to grow their value in a broader way. We aren’t going to solely rely on humans to do the work but develop them to change the way they operate to provide that governance framework and oversight that sits and tests the output from tech. Integration between tech and fin crime 2nd line of defence will become much more important going forward.

The evolving financial landscape demands consultants who are not just specialists in data analytics but also proficient in financial crime risk management. Companies are increasingly looking for individuals with a broad range of skills to navigate the complexities of regulatory environments and execute effective remediation plans. FDM’s Model Office Financial Services approach exemplifies how amalgamating these skills can create versatile consultants similar to a Swiss army knife, capable of addressing various challenges in risk and compliance.

The Cost of Regulatory Change and Ad-Hoc Remediations 

Regulatory changes and ad-hoc remediation efforts can be costly and time-consuming. A robust data strategy supported by senior buy-in is crucial for building a sustainable compliance framework. Clean data, structured effectively, enables organisations to train models for predictive analytics, reducing the need for frequent and costly remediation.

Human Oversight in Automated Processes

While automation and AI offer immense potential, human oversight remains crucial to interpret responses produced by a data-driven control environment. Anyone building AI models recognises that in order to get any regulatory buy in they need to demonstrate how they’re structuring data and how they’re controlling how AI is used and that the output is being reviewed by a human. Data isn’t good enough that AI can take over. Thus, human oversight ensures that automated processes deliver reliable and compliant results.

Have regulator expectations evolved in terms of KYC remediation? 

Nicola Poole, Global Head Client Experience, KYC Onboarding & Broader Regulatory Change Operations said, ‘Over the last few years, regulator expectations have increased quite significantly, so they want to see skills being upfront in the foundation design of any programme being put forward.

Remediation has to be forward thinking. Regulators will now hold you for the sustainability of design. The challenge is to educate stakeholders holding the budget about size of fines, importance of compliance and risk management – so they understand their responsibilities and come forward with the budget.’

FDM’s credentials in the Risk, Regulation, Compliance space  

To date, we have recruited, coached and placed 3500 consultants in the field. Our extensive alumni network spread across diverse expertise help feed into our Risk practice and model office. We’ve hosted multiple events and produced original content over the years with thought leaders and SMEs in the field, sharing knowledge that has helped us and our clients build capabilities. Additionally, we are trying to address the industry’s challenge of recruiting new young talent.

Our successes in the field are based on the skills and capabilities that we arm our consultants with, using experiential and agile learning techniques, prior to deployment onto client site.

Transforming Execution and Remediation Plans into Future Solutions

FDM’s Model Office FIS and Skills Lab are designed to convert execution and remediation plans into innovative solutions for tomorrow. By understanding and cataloguing data meticulously, we help organisations gain accurate insights and develop automated processes.

For instance, a government regulator we worked with had fragmented data across multiple systems. By spending six weeks to catalogue and understand their data, we significantly improved their data integrity and accuracy, reducing the time required for annual assurance reports from three months to a matter of weeks.

We are currently engaged in a Train, Change and Operate large-scale self-imposed remediation KYC effort in a large financial institution, with aggressive deadlines and challenging resourcing parameters.

The Model Bank FIS Journey 

Craig Hunter, FDM Business Coach and one of our panellists at the event gave an overview of the FDM Model Office (FIS).

The FDM Model Office Financial Institution Services (FIS) was conceptualised in 2021 to manage our risk with a large bank. Over the last 2 years, it has grown to provide not only KYC but also a full financial crime programme that we can run in a simulated client environment.

It is a platform to coach new consultants coming into the Risk Practice as well as for upskilling consultants returning from client assignments and for cross-skilling between our practices.

We’re looking to push the boundaries of the model bank and utilise digital twins that can provide us with ‘coaching on tap’ to assist individuals with their learning journeys within the model bank.

Looking towards the future, we want to continue to forge strategic partnerships to enrich the data pool and the different scenarios we can offer through the Model Office FIS. We’re in discussions to see how we can implement crypto currency and look at how transaction monitoring in the crypto currency space works in partnership with a company that offers data analytics.

Final thoughts 

The more a firm invests to prepare upfront, the more it understands how to better manage operationally, using its existing workflow (reduce costs), and building better tools, (generating bigger sales). The audience and speakers concurred on the opportunity for “model bank” to develop into “model office FIS” and become our solution to better service the broader financial services.

The future of financial services lies in leveraging data effectively and integrating new technologies with the right skillsets. At FDM, we are committed to building data-driven strategies that enhance operational efficiency, and regulatory compliance. By fostering a blend of data analytics and financial crime risk expertise, we prepare our consultants to meet the evolving demands of the industry and turn today’s challenges into tomorrow’s solutions.

Book an introductory call with our Risk practice team today!