In the ever-evolving landscape of global financial crimes regulation and geopolitical challenges, one thing remains constant: change. Marc Temple, global development director at LexisNexis® Risk Solutions, explains how orchestration technology is helping organisations future-proof their operations.
Financial crime is on the rise. E-commerce bot attacks soared by 155 per cent in 2021 with digitally-based businesses bearing the brunt of the increase. Global businesses saw a 32 per cent jump in human-initiated fraud attacks in the past 12 months and the cost-of-living crisis has played a clear role in driving increases in financial crime and fraud.
Our research shows that 59 per cent of banks and fintechs are now prioritising financial crime and fraud risk platforms to better protect both their customers and their own operations. Every customer must be verified, every transaction monitored, and every risk scored.
The term ‘risk orchestration’ is relatively new, but is quickly gaining traction as the next evolutionary stage of risk management. While its predecessor is often associated solely with compliance, orchestration expands these capabilities by embracing the pillars supporting it.
Orchestration is the new automation
Have you ever been caught out by change you didn’t realise had happened? Such as getting a speeding ticket on a well-driven route thanks to a stealthily-introduced lower speed limit.
Regulated financial services firms face this exact same risk, every day.
You’re a company that abides by regulations, but you’re suddenly facing regulatory consequences for missing an updated sanction rule that you knew nothing about. Tat the current time, the war in Ukraine and other geo-political affairs are driving frequent updates to global sanction designations. With new actions from the Treasury’s Office of Foreign Assets Control (OFAC) occurring on a near-daily basis, and the running document from OFAC listing sanction updates for 2022 alone already on 572 pages, keeping up with these changes manually can be taxing and confusing.
A colleague of mine, Andy Shank, principal product manager at LexisNexis Risk Solutions, recently analysed how navigating these changes can feel like walking across a minefield. A quick customer screening process doesn’t even come close to the necessary due diligence required to properly protect your business from risk.
Failing to realise this can be a costly mistake. Here’s where a risk orchestration platform like LexisNexis® RiskNarrative™ can help, enabling firms to be responsive to ever-changing global regulations with quick and simple adjustments to their onboarding and ongoing screening rules. Even better, this can be done without the need for coding or technical support.
“Keeping tech stacks and customer journeys compliant with new laws and a constantly-changing regulatory environment can be overwhelming to even the most seasoned compliance professionals”
‘Single customer view’
Organisations of all sizes often struggle with regulatory compliance, risk assessment and customer screening, not because of negligence, but because of the complexity and expense usually attached to it. Significant time and resources are often spent by various teams to double check their customers during onboarding and ongoing monitoring. These teams can be fragmented and siloed. Their views may also differ, adding confusion and resulting in a drawn-out onboarding process for the customer.
In a customer-centric world, drawn out wait times are seldom looked upon favourably. In fact, research by McKinsey & Company, found that found that every one-point increase in customer onboarding satisfaction on a 10-point net promoter score (NPS) scale resulted in a three per cent increase in customer revenue. Neglecting to take a single customer view is a sure-fire path to lost revenue.
However, changing an onboarding experience can be a huge undertaking and massively disruptive to your day to day operations. This is not something all organisations are willing to risk changing, but with orchestration, firms potentially stand to reap significant dividends without suffering significant disruption. Implementation is simple, through a single API. Improved customer experience, reduced friction and manual processes, and that coveted single customer view, are all within easy reach through orchestration.
Adaptability and agility to enter new markets
Financial organisations – from banks and fintechs to payment companies and crypto firms – are constantly on the lookout for ways to optimise their financial crime and fraud prevention efforts while minimising the potential side effects on their customers and product innovation.
Keeping tech stacks and customer journeys compliant with new laws and a constantly-changing regulatory environment can be overwhelming to even the most seasoned compliance professionals. And with regulators expanding their reach to manage crypto exchanges and enforce robust know your customer (KYC) and anti-money laundering checks, the reach is widening.
Our customers at RiskNarrative™ are not just UK based – they extend across the globe, from North America to APAC. Yet the one common challenge they face is adapting to changing global regulation in an agile way.
Managing crypto changes
In late 2021, China banned the trading and mining of cryptocurrencies. Meanwhile, in the US, cryptocurrency regulations still remain in a constantly evolving albeit slightly grey area and the UK announced plans for an entirely new regulatory framework. Risk orchestration can provide firms with capabilities to ensure that whatever the regulatory changes, they can adapt quickly to ensure full compliance.
The total value of regulatory fines levied on crypto firms surged to $193million in 2022 and no company, big or small, is immune.
Through a single API, an orchestration platform can enable crypto firms to act quickly and effectively when there are any macroeconomic, market or specific regulatory changes.
Auto-decisioning to reduce manual workload
Legacy systems in banking, comprising fragmented multi-vendor tech stacks that don’t integrate or talk to one another are simply not agile enough in the modern age. The resulting siloed data leads to slow decision-making and a lack of flexibility to respond quickly to changing customer needs or market conditions – effectively, to competitive disadvantage.
By contrast, a single cloud-based decisioning platform provides a unified view of data and a more flexible architecture, allowing banks to make decisions faster and more efficiently.
This is only the beginning…
Rapid digitalisation of consumer services is here to stay. Instant payment settlements will render traditional methods of risk management and customer screening outdated and obsolete. Risk orchestration lightens the burden of managing change.