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The importance of Disruption in Compliance

Today’s regulatory landscape for financial institutions is massive and keeps growing. In addition to strict financial regulations, the regulations that directly affect the customers of financial institutions, and other obliged entities, have grown exponentially the last 20 years. Especially the last 10 years.

This article is based on Julie Odden’s presentation during our conference Compliance Disrupted. You’ll find the recording of her presentation on the bottom of this page

The massive regulatory landscape serves a purpose: To strengthen the financial markets and to detect money laundering. We see repeatedly that financial institutions are aiding and abetting money laundering and helping criminals, demonstrating the necessity for the regulations. AML should, however, be a top priority for obliged entities today. Preventing and fighting financial crime is a crucial part of financial institutions’ social responsibility and the integrity of said institutions.

Why we need disruption

  • While obliged entities have been late in acknowledging the importance of fighting financial crime, the AML regulations themselves have been late in implementing real consequences. This has resulted in a favorable landscape for financial crime.

  • Innovation in tech is lagging behind as many of today’s solutions for transaction monitoring, risk classifications and ongoing due diligence are flawed.

  • Money laundering and terrorist financing are both well-planned human acts that have become more sophisticated as technology has advanced. By itself, technology or a mathematical formula will not be able to predict risk or identify criminals.

The challenges of AML compliance

The issues above create several AML challenges for obliged entities:

The competitive effect of bad technology: Customers expect top products, personalized experiences, and the most complicated of all: Simple solutions. Obliged entities with difficult onboarding processes are losing business to the obliged entities with seamless processes.

The regulatory challenge: Flawed risk classifications and transaction monitoring systems create false positives. The false positives steal valuable time from compliance workers as they must investigate all cases.

The challenge of bad data and back-office systems: An area that is sorely lacking innovation and can almost always be traced back to the establishment of an obliged entity. Most companies have not made the necessary investments in satisfactory IT solutions. As the companies grow, so do the problems. Instead of fixing these problems, many have put them in the pile of so-called “technical debt”.

The crime prevention challenge: All the challenges above restrict obliged entities from fulfilling their social responsibility of fighting financial crime. Being so far behind, even a small improvement will go a long way.

Disruption is the answer to these challenges, and it is not about moving fast. It's about thinking outside the box.

Watch the recording below to get Julies tips for disrupting your company’s AML compliance and input on why it should be your top focus:

Want to know how we solve AML challenges for obliged entities?

Read about our CLM solution or get in touch!