Compliance continues to still be a key issue for banks to cope with despite the passing of ten years since the global financial crisis. That's based on the latest industry survey by technology Accurity on compliance and anti-money laundering (AML) professionals.
According to the survey over a quarter of participants found the rising costs of compliance very challenging to deal with. Another 35% found keeping up to speed with changing regulatory requirements very challenging to handle.
Specifically, survey respondents were very concerned with the potential fines and enforcements actions from not following/incorrectly following regulations. Close to 70% of finance professionals interviewed said avoiding a regulatory penalty was a high priority for them. Others believed adhering to compliance standards would help them protect their reputation and existing customer relationships, with 65% considering it a high priority to do so.
Collecting accurate ownership information, having up-to-date KYC (know your customer) information and acquiring accurate sanctions data were some of the top actions that financial institutions felt that they were not necessarily prepared for.
As a result, several financial institutions have sought to centralize their source of KYC information to determine counterparty risk. In fact, 31% of institutions use a centralized source of information to decide risk and collect KYC, up from 21% recorded in 2014. That sentiment is reflected in the reduced number of counterparties that financial institutions are looking to work with. In 2014, 58% of firms surveyed mentioned they had over 251 counterparties. That number fell to 43% in 2017.
"There are significant efficiency gains yet to be made in this [compliance] industry, and technology innovation will be key," states Dalbir Sahota, KYC industry specialist at Accurity.
"We expect to see financial institutions automate more of their KYC processes as well as looking to new developments in artificial intelligence and machine learning to overcome some of these efficiency challenges – so there is cause for optimism," adds Sahota.