• Laurence Birnbaum-Sarcy, Leadership |
3 min read

The COVID-19 pandemic has accelerated a mindset change in customers. New behavior trends are requiring companies to think about where the biggest risks are when it comes to the fight against financial crime. With more transactions than ever being initiated remotely, this opens up new ways for financial criminals to breach the defenses of financial institutions. Technology can leave your organization vulnerable, but it can also be an asset that ensures you're always protected.

Understanding the risks

The digitization of banking and financial services means your customers can engage quickly, anywhere, any time and on any device. This freedom for them can lead to complications for those who need to understand where transactions are coming from and who is behind them. Their financial security is in your hands, so if you don't know, you need to find out.

As attempts in digital fraud grow, so does the level of public and regulatory scrutiny. Financial institutions are struggling to respond to the damages that it entails. So, what should you do? Turn up your due diligence practices.

Know Your Customer (KYC) and Customer Due Diligence (CDD) have always been a part of financial processes, but what has traditionally involved piles of paperwork and manual checks is no longer sustainable. Technology is now essential to effectively establish and maintain customer relationships. Certain organizations already use voice and facial recognition, and others are directing their attention towards artificial intelligence and machine learning, particularly for ongoing transaction monitoring. These advanced technologies are faster and are increasingly proving to be more reliable than the snail-mail way of doing things. Consumers have embraced new technologies as a necessary part of their digital lives; organizations have to align with them.

However, I believe the technologies are only as secure as the people who are operating them. The information they provide feeds into various departments and, ultimately, it's down to human beings to manage, monitor and assess it for risks. With every new advancement comes a need for organizations to update their systems, rethink their processes and retrain those who are using them.

The opportunity for change

Most modern financial organizations are seeing the benefits of digital technologies. A number of them have adopted the cloud, embraced machine learning, and are generally open to exploring new technologies that make life easier for their customers and their operations more efficient. While these come with risks and associated costs, they're generally seen as risks and expenditures worth taking.

This contrasts with some regulatory bodies, who will generally hold a risk-averse stance when anything new comes along. Issuing regulations along with compliance requirements is a very literal business and those in charge of setting the rules don't typically like any grey areas when it comes to financial crime controls -- you either are or you aren't compliant. In the recent years, regulatory authorities have accepted the need for organizations to implement new technologies to help achieve sustainable compliance. They expect, however, that these new technologies are properly developed, evaluated, implemented and ultimately validated to ensure their effectiveness and the maintenance of a detailed audit trail. That can certainly drive organizations to think twice before implementing new systems.

In my view it's essential that organizations work with regulators to assess both new technologies and where the biggest risks lie. This collaboration can lead to compliance requirements that are suitable to the modern age, with financial institutions working to ensure the latest developments in technology are one step ahead of those looking to exploit them for financial gain.

KPMG professionals guide C-suites through the key challenges of the new digital world and regulatory-driven transformations, and reassure them that these issues can be dealt with. This is a time of opportunity for leaders to transform their processes and keep up with the customer - all in order to stay ahead of financial crime.

Read additional blogs in our Financial Crime series.

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