Contingent workforce continues to plug vital gaps in the fight against financial crime

Following on from the recently issued ‘Dear CEO letters’, regulators have warned that financial crime control gaps need to be identified and mitigated this year, and if they are not, they will be issuing significant fines to unresponsive or uncooperative market participants.

According to the Mortgage Introducer, almost half (48%) of regulated firms in the UK have reported seeing a rise in financial crime attempts in the past 12 months, with a further 26% confirming that they have been victims themselves, according to research by SmartSearch.

As the market adjusts to the new norms in the post-BREXIT and post-Covid periods, there has been a large shift in focus from the regulators towards strengthening UK AML and KYC systems and processes

With that in mind, what will be the top priorities in getting financial crime systems and controls up to regulatory standards, and how can a contingent workforce help to get compliance functions ready for regulatory review?

Understanding data will be key

Where many firms fail in their attempts to strengthen their processes and systems is in a lack of understanding around the transfer of data in their transaction monitoring and controls.

Data plays a pivotal role in remaining compliant, and firms will need to see if gaps exist between the oversight of the transactional data feed into their transaction monitoring systems. Your teams will need to understand how your transaction monitoring systems are set up from a technical perspective and ensure that regular assessments of the data feeds and data integrity of the systems are being checked.

Contingent resource is often vital in these scenarios to conduct these types of checks so that BAU can resume. Teams (small and large alike) are developed to help analyse and enforce enterprise data standard policies at various levels of the business and highlight key gaps in existing processes require attention.

Heightened risk assessments

Risk assessments will require in depth analysis of all controls. Many businesses however fail to assess specific risks that can lead to inaccurate business-wide risk assessment.

Often, the main contributing factor to this, is that many compliance teams are understaffed and do not have the internal capacity to ensure that any weaknesses are clearly and fully acknowledged and addressed.

Contingent teams can ensure a ‘no stone is left unturned approach’, and in a highly pressured regulatory environment, hiring contingent resource can make a vital difference in understanding the weaknesses of your risk assessments, as well as setting up concrete plans to resolve them.

Enhanced CDD

CDD is one area of investigation that is often not adequately performed.  As simple as the processes may be, many banks still do not get it right.

Many turn to automation to address these gaps, but the reality remains that the right skilled resource is vital to oversee the technology itself. In many cases, transaction monitoring alerts specifically require strengthening, and this can be achieved by the right mix of people and technology.

With enhanced customer due diligence checks, remote ID and verification checks, and risk assessment checks all being conducted during the lockdown, which was necessitated by the pandemic, compliance teams have had to spend additional budget on outsourcing these highly necessary services. All whilst resource requirements have been compounded by a surge in customer demand brought about by the COVID outbreak.

What is needed, now more than ever, is a combination of a people plus technology solution. Automation of your current AML processes and systems can only take you so far – they need to be purposeful, and the right people will very much be needed to achieve this.

Technology automation can of course help with repetitive and relatively mundane tasks, but people can and must oversee automation, as well as ensuring that informed and accurate decisions are being made.

How can the contingent workforce act as a driver for regulatory change?

Utilising the expertise of contingent resourcing can offer many firms breathing space in terms of resolving any issues their AML controls may have. Setting up the right teams to ensure any gaps are identified will be key for firms this year as regulators place more pressure on financial service participants to strengthen current compliance systems and controls.

If your business has been impacted by additional regulatory or compliance pressures and needs additional staffing support in your compliance departments, speak to us to see how we can help in supplying experienced and effective additional members to your team.