By Elizabeth Hearst for AMLi
The Director of Financial Crime at LexisNexis Risk Solutions, Tracy Manning, has said the global pandemic created a “perfect storm” for financial crime compliance teams in their move to digitalisation.
Although they weren’t necessarily “well prepared” to weather the storm initially, the financial sector saw an “accelerated digital adoption”, with internet traffic surging by almost 50% when the COVID-19 pandemic struck.
“In the first year of the pandemic, that accelerated digital adoption by five to seven years in a single year, and we saw vast opportunities for very tech savvy criminals who also had their usual routes of moving money cut off and changed… leveraging technology and the anonymity of the digital channel,” explained Tracy.
Currently serving as Director of Financial Crime, Tracy says her focus is largely on the North American market, but keeps abreast of global FinCrime trends. Prior to joining LexisNexis Risk Solutions, Tracy’s background was in e-commerce, fraud prevention and advertising having spent a number of years with AT&T, Twitter and GroundTruth.
She revealed that the total cost of financial crime compliance across all financial institutions in the company’s 2021 report was $213.9BN, with increased compliance costs recorded across the board, and an average 59% of costs directed to labour.
She added that companies that had invested more heavily in technology prior to the COVID-19 pandemic suffered 10 times fewer challenges than those who did not.
When asked about the role of AI and machine learning in fighting FinCrime, she said: “It’s very much become a strategic imperative to drive new efficiencies and reduce labour costs, while improving the customer experience.”
“We know that the majority of firms still expect that costs are going to continue to rise on average of 8% year on year for the next year or two, and the expectation around that is that two-thirds of that increase will involve investment in technology to a point,” she added.
She stressed that Compliance programmes will be about “automating what you can and also creating more consistent processes, while freeing up humans to do the higher value work that requires judgement.”
Tracy emphasised that investment in technology can “create consistency”, adding that it was a “major advantage” to be able to “keep up with the rising alert volumes, put more measures in place whilst being able to maintain or cut labour costs and keep human resources focused on the highest value work.”
She revealed that SWIFT’s ISO20022 cross border payments system would be operational soon, with banks expected to ramp up preparation for its implementation by November.
However, despite transitioning efforts requiring “tremendous effort” in the short term, Tracy stressed implementation of ISO20022 will “increase the speed of payments, but will also reduce costs for [bank’s] compliance team”, adding “richer, more detailed information and messages.”
When asked about what differentiates LexisNexis from its competitors the “depth and breadth” of the company’s data is what sets it apart. “We have a very unique combination of both digital and physical data, and that is probably our most compelling differentiator,” said Tracy.
She explained that LexisNexis Risk Solutions provides “much of the data to major banks and corporations on things like politically exposed persons, beneficial owners, and adverse media”, using machine learning and AI to create scores and flags to identify risk or risk of money laundering.
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