Lessons from the FinCEN files – using fintech and regtech to spot dirty money

Blog | 30 Sep 2020

As the recent FinCEN files news has shown, spotting and acting on dirty money is an on-going challenge in the financial sector. With the relentless growth in tech-enabled financial services, Peter Fisher looks at the impact of the cloud on the compliance space and explores how financial institutions can overcome common regtech implementation challenges to both comply and tackle money laundering

In the financial services sector, fintech has seen the industry transition from face-to-face meetings at local bank branches to an environment where nearly every banking process can be completed online. That goes some way to explaining why, in the UK alone, there were 3,303 local branch closures (equating to 34%) between January 2015 and August 2019, according to research from consumer group Which?i

Of course, the growth in technology among financial services organisations isn’t limited to customer-facing functions or services. It’s prevalent throughout every corner of financial services, in response to market disruption and the ever-evolving financial crime and regulatory landscape.

For example, in 2019, over 220 international regulatory changes occurred every day – amounting to 80,000 updates that yearii. Regulations will continue to appear and evolve as security is tightened and due diligence against crime is improved.

Against this backdrop, and in light of issues raised by the recent FinCEN files news, it’s no surprise that financial institutions (FIs) are also turning to the latest ‘regtech’ to assist with regulatory compliance and improve the management of their regulatory processes.

Layers of complexity

Clearly, new technology is being introduced for a reason, namely, to empower compliance teams with better knowledge and more effective ways of working. For example, Know Your Customer (KYC) and Customer Due Diligence (CDD) technology can improve on-boarding processes and help drive down costs. Meanwhile, effective alerting and case management can reduce false positives, as well as improving efficiencies and saving considerable time as a result.

But, while the rise of regtech brings many wins in terms of compliance, it’s not all plain sailing; the implementation of new technology can be complex. Teams need to be able to understand new systems to really use (and benefit from) them. Many companies will first need to focus on the development of specialist skillsets and capabilities in order to harness their regtech investments – a challenge of no insignificance given the FinCEN files have recently put the industry under even more scrutiny than usual.

In addition, when new innovations are bolted on to existing legacy systems, financial institutions can be left with data flow issues, with some data inaccessible or difficult to extract. So, what’s the answer?

The cloud – untangling regtech confusion

More and more organisations are turning to cloud technology to support the implementation of their regtech systems. Because it is flexible, fast, and efficient, the cloud can help FIs to remove the complexity from their compliance processes and systems, while still taking advantage of the latest innovations to fight financial crime and meet regulatory requirements.

Greater flexibility and adaptability helps organisations to achieve scale and cope with data management issues without the requirement for significant capital expenditure. Alongside that scalability, the improved compatibility with multiple environments that can be achieved when migrating to the cloud ensures disparate data sets can be consolidated.

These are just a few of reasons why we’re seeing compliance in the cloud grow in popularity among financial institutions of all sizes and those who are seeking to remain competitive in today’s challenging environment.

At SymphonyAI NetReveal, we offer a holistic hosted solution that promises financial services customers the same security standards as our government deployments. NetReveal 360° frees institutions from having to manage internal infrastructure, solutions or schedule maintenance and updates, by shifting these responsibilities to our managed services. Customers can simply log in wherever they are and defend their financial systems with ease.

Find out more about how the cloud can help your compliance processes – take a look at our NetReveal 360° webpage.