The shift to digital financial crime compliance relies on the right talent
The banking industry is seeing tremendous disruption brought on by digitalisation and innovative technologies, and the pace of change is quickening. As technology alters client expectations and the regulatory environment, banks are forced to make critical decisions about the technology they implement as well as the workforce driving it whilst remaining compliant.
So why should banks place emphasis on finding the right talent when it comes to embracing digital adoption?
Open banking, payments, and crypto adoption
New Zealand banks are embracing digital technology automation and it’s clear to see this in the mass adoption of open banking, digital payments, and cryptocurrency.
- Open Banking: With the much-awaited introduction of legislation defining a Consumer Data Right (CDR) for New Zealand, 2022 is expected to be a watershed year for the country’s financial services. This legislation will signal the country’s shift from an industry-led approach to a regulated one that is in line with Australia and the United Kingdom for open banking.
- Payments: The central bank of New Zealand is eager to plug gaps in its payment experiences with a real-time programme as a result of Covid-driven uptake of digital payments in the country. There are currently few details available, but technology will not be an issue since API-based open banking is already a significant part of New Zealand’s payments ecosystem. Due to this and the market’s modest size, a point-to-point system based on APIs may become the preferred architecture. Compared to the frequently observed centrally developed, owned, and operated schemes elsewhere, this would be a more affordable strategy[1].
- Cryptocurrency: Binance announced its registration as a financial service provider in New Zealand on September 29 via a tweet, enabling citizens to use services like spot trading, nonfungible tokens, and staking. Following approval from regulators in Dubai, Abu Dhabi, Kazakhstan, and Italy for Binance to build a subsidiary, the company relocated to the crypto-friendly Pacific nation[2].
- AI Automation: Many banks have adopted artificial intelligence (AI), which can quickly parse unstructured regulatory data to gather regulatory intelligence to gain traction to support regulatory reporting requirements which can often change.
It is clear to see that digital adoption in traditional and neo banks is on the rise, however, banks will need to develop a robust digital strategy that moves from legacy systems but at the same time have the right talent pools to match.
How can the contingent workforce drive digital compliance adoption?
A consistent challenge and issue with getting compliance technology and automation right are that every aspect of your compliance function needs thorough review and improvement, and with compliance teams already under significant BAU pressure, many find it difficult to have a true view of what additional improvements need to be made, and often in a quick turnaround period.
Contingent resource 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.
Risk assessments will require in depth analysis of all controls. Many businesses, however, fail to assess specific risks that can in turn 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.
CDD is one area of investigation that is often not performed. As simple as the processes may be, many banks and other financial institutions still do not get it right. Many turn to automation to address these gaps, but the reality remains that appropriately skilled resource is vital to oversee the technology itself. In many cases, transaction monitoring alerts specifically require strengthening, and this can only be achieved by the right mix of people and technology.
You can automate systems and processes, but you still need people. Technology automation can of course help with repetitive and mundane tasks, but people can and must oversee automation, as well as ensure that informed and accurate decisions are being made. 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.
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.
