Connect with us

Banking

FENDING OFF FRAUDSTERS: SIX STEPS TO TACKLING FINANCIAL CRIME IN BANKING TODAY

Published

on

FENDING OFF FRAUDSTERS: SIX STEPS TO TACKLING FINANCIAL CRIME IN BANKING TODAY

Balajee Sethuraman, Global Managing Partner & Head of Banking & Financial Services, Europe

In the financial services industry, disruptive technology is generally seen as an enabler of business growth, as well as an enhanced consumer experience. For example, blockchain ledgers have the potential to significantly speed up international payments and also revolutionise the way customer records are stored. However, the rapid advance in cybercrime techniques means that the merging of the financial services with technology is actually, at times, jeopardising assets.

Cyber criminals are constantly trying to target our wealth and our identities, and the threats are gathering pace. In fact, financial crime is expected to have cost businesses over $2 trillion globally by 2019. This figure is a combination of money laundering, cybercrime, fraud and tax evasion. As a result of factors such as globalisation, proliferation of banking channels, rising transaction volumes and advances in technology, financial firms of all sizes are increasingly vulnerable as they struggle to keep up with the sophisticated techniques associated with the hacker of today.

Simultaneously, financial institutions are faced with ever-evolving regulatory requirements including updated AML (Anti-Money Laundering) compliance. In fact, a number of high profile banks have faced sanctions and criticism over anti-money laundering controls, including Deutsche Bank and Swiss Bank BSI. With heavy penalties in place for those failing to adapt defences fast enough, a precedent is being set for greater transparency, responsibility and compliance. Despite banks making huge investments in security and compliance measures, a fragmented approach to financial crime may limit their success in preventing it. Undoubtedly, banks need to continuously adapt and enhance their policies and approach to fighting cybercrime to protect data assets and optimise revenues. Here we recommend six steps to tackling these problems:

  • Tailor the risk management process

Crucial to developing adequate security controls is acquiring knowledge about potential risks and how they could affect the business. Conducting appropriate thorough risk assessment and mapping the results against internal policies, procedures and controls can allow banks to assess their ability to mitigate risks and adapt accordingly. Considering an organisation’s size, channels, geographies and customer types, and re-evaluating strategy regularly as these factors change will ensure that a business’s risk management plans remain relevant.

  • Address internal silos 

The wide spectrum of financial crime, from money laundering to cyber-attacks, means that banks are often tempted to merge the various functions tasked with crime prevention. However, too much of this can increase vulnerability; in fact, a better approach is to improve internal communication and co-ordination between functions. For example, cybercrime and AML disciplines face similar challenges and often overlap in terms of processes, systems and data requirements. Therefore, teams like these with similar functions are in a great position to exchange insights.

  • Overcome data challenges 

Key to managing risk is acquiring high quality and consistent data from across an organisation, something that is not always easy for large banks which have accumulated data from multiple systems as a result of mergers and acquisitions. Standardising large volumes of customer and transactional data can significantly improve overall data quality and provide the accuracy needed to support real-time monitoring and data-driven decision-making. Key to achieving this is ensuring that employees adhere to internal standards when entering data.

  • Applying advanced analytics 

Accruing the relevant data is important, but using it effectively is another factor altogether. Using analytics and visualising data is now essential to combat cyber-criminals, and understand threat patterns. While banks are already collecting customer data to meet Know Your Customer (KYC) regulations, additional analysis of data from point of sale, social media, customer databases and external sources such as data vendors allows financial services firms to enhance the speed of fraud detection and prediction. Only by digging deeper into this data are financial institutions able to better understand the risks posed by customers, transactions and other entities and discover complex threats with the potential to impact multiple lines of business.

  • Lead by example

To crusade against financial crime, banks should ensure that senior employees set the tone by establishing accountability standards, controls and policies. Management must also promote transparency by working closely with regulators and give incentives for compliance. An important aspect of this is training employees on the latest regulatory developments and raising internal awareness of emerging threats, such as risks associated with virtual currencies and new technologies.

  • Collaborate with industry-wide initiatives

Some businesses have developed their own proprietary tools to develop sustainable and scalable crime prevention solutions, un-guided by wider best practice. While considering industry standards is key, financial institutions should collaborate with the wider industry to re-evaluate their strategies regularly and keep up with changing policies. Remaining stagnant can result in duplicated efforts across the industry and additional compliance costs. Banks taking a unified approach can lower these costs, address skills shortages, create standards and foster innovation. Beyond the immediate financial industry, working with law enforcement agencies and government can help banks mitigate the evolving tactics of financial criminals.

The ever-expanding arsenal of criminals, combined with regulatory uncertainty, is making financial institutions of all sizes vulnerable to fraudulent activity. Despite the new methods developed by fraudsters, technologies such as real-time analytics and machine learning are now readily available to begin the fightback.  Banks must adopt a proactive approach that prioritises building an appropriate internal culture, implementing adequate defences and collaborating with the wider industry and regulators, to avoid high technology procurement and maintenance costs and attract employees with the right skills. With a horde of cyber-criminals targeting their clients’ wealth and identity every single day, it has never been more important for banks to keep up with – and surpass – the techniques of cyber criminals. Only then will banks continue to be trusted safe havens for our money.

Banking

Bank of England adapts bank stress test for pandemic era

Published

on

Bank of England adapts bank stress test for pandemic era 1

By Huw Jones

LONDON (Reuters) – The Bank of England’s health check on banks this year will seek to ensure that Britain’s big lenders, including HSBC, and Barclays, can continue supporting the economy during the pandemic and will also look at how banks can return to more normal dividend levels.

Last year, the British central bank cancelled its annual stress test of banks so they could focus on keeping credit flowing to an economy hit by its worst downturn in 300 years due to COVID-19 lockdowns.

The test usually focuses on banks’ ability to face big theoretical shocks, but the focus has changed given that the economy is facing real stresses from the pandemic, the BoE said.

“At this point stress tests are used to assess whether the buffers of capital that banks have built up are large enough to deal with how the prevailing stress could unfold,” the BoE said in a statement.

Banks that will be tested this year also include Lloyds, NatWest, Standard Chartered, and Nationwide Building Society. Virgin Money UK will take part for the first time.

The BoE said this year’s test of the leading banks will be conducted in a “staggered” way, with banks submitting their initial projections earlier in April on coping with a range of market shocks without going below bespoke minimum capital levels.

The stress test scenario includes a second dip in economic growth in 2021-2025 on top of the one seen last year, with UK residential property prices crashing by a third and unemployment surging to just under 12%.

The scenario also includes simultaneous economic slowdowns globally, with protectionist tendencies in world trade becoming entrenched, the BoE said.

The test will also check if a big change in consumer spending patterns seen during the pandemic, such as sharp falls in spending on travel, entertainment and hotels, poses a risk to banks if these trends persist long term.

The BoE will publish aggregate results in the summer, with the usual bank-by-bank outcomes made public in the fourth quarter.

After the economy went into its first lockdown in March last year, the BoE told banks to suspend dividend payments to preserve capital. In December, the central bank set out “guardrails” for relaxing its curbs on bank dividends.

“As noted in the December 2020 Financial Stability Report, the results of the 2021 test will also be used as an input into the Prudential Regulation Authority’s transition back to its standard approach to capital-setting and shareholder distributions through 2021.”

To help banks with the different timetable this year, the BoE said their “ring fenced” retail banking units would not form part of the test, but will be included in the 2022 test.

(Reporting by Huw Jones, editing by Louise Heavens and Jane Merriman)

Continue Reading

Banking

‘Act big’ now to save economy, worry about debt later, Yellen says in Treasury testimony

Published

on

'Act big' now to save economy, worry about debt later, Yellen says in Treasury testimony 2

By David Lawder and Andrea Shalal

WASHINGTON (Reuters) – Janet Yellen, U.S. President-elect Joe Biden’s nominee for Treasury Secretary, urged lawmakers on Tuesday to “act big” on coronavirus relief spending, arguing that the economic benefits far outweigh the risks of a higher debt burden.

In more than three hours of confirmation hearing testimony, the former Federal Reserve chair laid out a vision of a more muscular Treasury that would act aggressively to reduce economic inequality, fight climate change and counter China’s unfair trade and subsidy practices.

Taxes on corporations and the wealthy will eventually need to rise to help finance Biden’s ambitious plans for investing in infrastructure, research and development, and for worker training to improve the U.S. economy’s competitiveness, she told members of the Senate Finance Committee.

But that would only come after reining in the coronavirus pandemic, which has killed over 400,000 in the United States, and the economic devastation it brought.

Yellen, who spoke by video link, said her task as Treasury chief will be to help Americans endure the final months of the pandemic as the population is vaccinated, and rebuild the economy to make it more competitive and create more prosperity and more jobs.

“Without further action we risk a longer, more painful recession now and longer-term scarring of the economy later,” she said.

Yellen said pandemic relief would take priority over tax increases, but corporations and the wealthy, which both benefited from 2017 Republican tax cuts “need to pay their fair share.”

She raised eyebrows of some senators and Wall Street when she said that Treasury would consider the possibility of taxing unrealized capital gains – through a “mark-to-market” mechanism – as well as other approaches to boost revenues.

DEBT BURDEN

She also that the value of the dollar should be determined by markets, a break from departing President Donald Trump’s desire for a weaker U.S. currency.

“The United States does not seek a weaker currency to gain competitive advantage and we should oppose attempts by other countries to do so,” she said.

Wall Street stocks rose on Tuesday in reaction to Yellen’s call for a hefty stimulus package, as well as to positive bank earnings updates. Oil prices also rose, while Treasury yields fell slightly on her comments that parts of the 2017 tax reform should be repealed.

Biden, who will be sworn into office on Wednesday, outlined a $1.9 trillion stimulus package proposal last week, saying bold investment was needed to jump-start the economy and accelerate the distribution of vaccines to bring the virus under control.

Asked what outlays would provide the biggest “bang for the buck,” Yellen said spending on public health and widespread vaccinations was the first step. Extended unemployment and nutrition aid, better known as food stamps, should be next, she said.

“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said.

She said even though the amount of debt relative to the economy has risen, the interest burden – the amount the Treasury pays to service its debt – has not, due to lower interest rates. She said she will watch that metric closely as the economy recovers.

NEW CLIMATE POST AT TREASURY

Yellen also called climate change an “existential threat” to the U.S. economy and said she would appoint a senior official at Treasury to oversee the issue and assess systemic risks it poses to the financial system.

She added investment in clean technologies and electric vehicles was needed to cut carbon emissions, keep the U.S. economy competitive and provide good jobs for American workers.

Yellen said China was the most important strategic competitor of the United States and underscored the determination of the Biden administration to crack down on what she called China’s “abusive, unfair and illegal practices.”

Asked whether China had committed “genocide” in its treatment of Muslim Uighurs as the Trump administration declared in a last-minute proclamation, Yellen said China is “guilty of horrendous human rights abuses, yes.”

Biden’s transition team urged the Senate to move swiftly to confirm Yellen. Democratic Senator Ron Wyden, who will lead the Finance Committee after Biden’s inauguration on Wednesday, said he would push for a confirmation vote on Thursday. Republican Senator Mike Crapo said he would work towards an “expeditious” confirmation for Yellen.

She also received the endorsement of all former Treasury secretaries, from George Schultz to Jack Lew, who urged senators in a letter to swiftly confirm Yellen’s nomination to avoid “setting back recovery efforts.” A spokeswoman for Treasury Secretary Steven Mnuchin, who steps down on Wednesday, did not respond to a request for comment.

(Reporting by David Lawder, Andrea Shalal, Ann Saphir and David Shepardson; Additional reporting by Trevor Hunnicutt; Editing by Heather Timmons, Andrea Ricci and Kim Coghill)

Continue Reading

Banking

Open Banking: the perfect pandemic tool – Equifax comments

Published

on

How the application network unlocks open banking’s future

With COVID-19 related financial fallout set to dominate the credit landscape in 2021, Dan Weaver, Open Banking Expert at Equifax UK, believes Open Banking solutions can provide lenders clarity in a sea of uncertainty: 

“With lockdown once again in place across the UK, it’s clear 2021 will be a year of extreme financial flux. While the vaccine roll-out programme will provide an economic boost and eventual easing of restrictions, forbearance measures, such as mortgage holidays and the government furlough scheme, will be wound down. This will lead to income shocks for many, and the potential for a nationwide surge in personal debt.

“With the third anniversary of its implementation today (13 January), Open Banking is entering a new mature phase of its development. The initiative’s credentials are now widely established, offering creditors the perfect pandemic tool to assess the most accurate picture of an individual’s finances.

“Consider someone who has just returned to the workforce after being made redundant or placed on furlough. Traditional credit bureau or legacy data alone would not always provide potential lenders with the most up-to-date information on their current financial circumstances and ability to repay credit at the point of application. Open Banking platforms, through customer consent, pull live data directly from the user’s bank account, allowing creditors to make an informed, responsible and fair decision about their current affordability on the most recent data available – a game-changing factor amid such widespread financial upheaval and rapid change in people’s circumstances.

“Open Banking is a tool for our times and it’s vital more credit providers, not just big banks and finance but utilities, insurance, auto and telcos companies, accelerate its adoption. Throughout our society and economy in the past year, we’ve witnessed feats of great innovation, executed at rapid speed. In 2021, we need to apply this transformational energy to the Open Banking landscape, slashing the time it takes for creditors to test protocol and fully set up their solutions.

“Three years after its arrival, we’re seeing Open Banking platforms improve digital, real-time income verification rates by more than 25% * – which is no mean feat. If an industry-wide, mass acceleration strategy was successfully achieved in 2021, it would prove extremely valuable and timely, and lead to better customer and creditor outcomes throughout the credit space.”

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

Audi aims to sell one million cars in China in 2023 3 Audi aims to sell one million cars in China in 2023 4
Business10 mins ago

Audi aims to sell one million cars in China in 2023

BEIJING (Reuters) – German premium automaker Audi aims to sell 1 million vehicles in China in 2023, versus 726,000 vehicles...

Netflix forecasts an end to borrowing binge, shares surge 5 Netflix forecasts an end to borrowing binge, shares surge 6
Business12 mins ago

Netflix forecasts an end to borrowing binge, shares surge

By Lisa Richwine and Eva Mathews (Reuters) – Netflix Inc said on Tuesday its global subscriber rolls crossed 200 million...

MGM Resorts drops takeover plan for Ladbrokes-owner Entain 7 MGM Resorts drops takeover plan for Ladbrokes-owner Entain 8
Business16 mins ago

MGM Resorts drops takeover plan for Ladbrokes-owner Entain

By Tanishaa Nadkar (Reuters) – Casino operator MGM Resorts International on Tuesday ditched plans to buy Ladbrokes owner Entain after...

Mike Ashley's Frasers ups stake in Hugo Boss to over 15% 9 Mike Ashley's Frasers ups stake in Hugo Boss to over 15% 10
Business18 mins ago

Mike Ashley’s Frasers ups stake in Hugo Boss to over 15%

(Reuters) – Mike Ashley-led Frasers said on Tuesday it has increased its stake in German luxury fashion house Hugo Boss...

Sterling rises above $1.37 for first time since 2018; UK inflation rises 11 Sterling rises above $1.37 for first time since 2018; UK inflation rises 12
Finance1 hour ago

Sterling rises above $1.37 for first time since 2018; UK inflation rises

By Elizabeth Howcroft LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the...

Euro sinks amid broader risk rally against dollar 13 Euro sinks amid broader risk rally against dollar 14
Finance1 hour ago

Euro sinks amid broader risk rally against dollar

By Ritvik Carvalho LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday...

Bank of England adapts bank stress test for pandemic era 15 Bank of England adapts bank stress test for pandemic era 16
Banking1 hour ago

Bank of England adapts bank stress test for pandemic era

By Huw Jones LONDON (Reuters) – The Bank of England’s health check on banks this year will seek to ensure...

Britain to publish new weekly consumer spending data 17 Britain to publish new weekly consumer spending data 18
Finance1 hour ago

Britain to publish new weekly consumer spending data

LONDON (Reuters) – Britain’s statistics office said it would publish new weekly consumer spending data from Thursday, based on credit...

Mercedes unveils electric compact SUV in bid to outdo Tesla 19 Mercedes unveils electric compact SUV in bid to outdo Tesla 20
Business2 hours ago

Mercedes unveils electric compact SUV in bid to outdo Tesla

By Nick Carey (Reuters) – Daimler AG’s Mercedes-Benz on Wednesday unveiled the EQA, a new electric compact SUV as part...

England soccer star Rashford nets younger buyers for Burberry 21 England soccer star Rashford nets younger buyers for Burberry 22
Top Stories2 hours ago

England soccer star Rashford nets younger buyers for Burberry

By Sarah Young LONDON (Reuters) – Burberry stuck to its full-year goals on Wednesday after a media campaign fronted by...

Newsletters with Secrets & Analysis. Subscribe Now