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HOW TO CREATE A HIGH PERFORMANCE BANKING AND FINANCE DATACENTRE ENVIRONMENT

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Eric Jorgensen At Virtual Instruments

By Eric Jorgensen, VP Sales EMEA, Virtual Instruments

Discussion of updating and consolidating an organisation’s IT environment for the optimum use, of storage and handling of sensitive data are topics of the highest priority. Across all industries, but particularly within banking and finance, the sheer volume need for real-time availability and agility of data, maintaining compliance and meeting Service Level Agreements for financial applications are all issues that are as high on the business agenda as ever.

For many, the existing technological infrastructure in financial institutions simply cannot keep up with the demands of today’s datacentres. CIOs and storage infrastructure departments are faced with the prospect of escalating costs and disruption to daily business. When it comes time for IT updates, decisions made around investing in new capacity, applications and infrastructure management tools are critical to an organisation’s performance and future. Delaying is not an option, according to Gartner, “By 2015, 20 percent of Global 1,000 organisations will have established a strategic focus on ‘information infrastructure’ equal to that of application management.”

Eric Jorgensen At Virtual Instruments

Eric Jorgensen At Virtual Instruments

While it’s all well and good to build your datacentre specifications and ideal design from the ground up – that is if you have the luxury of investing millions in an entirely new datacentre with the fastest and newest technology – the reality is that there is a process in procurement and upgrades, and this takes time. There is a definite gap between the introduction stage of a product and its time of adoption and growth. Consequently there is often a lag behind the hype of the latest datacentre developments, such as Flash storage systems. In addition, many will be faced with upgrading within a legacy mainframe environment. This can produce a range of escalating interoperability issues, while the challenges facing each organisation are entirely unique.

So how do you go about creating the ideal efficient datacentre infrastructure within these current constraints and challenges?

The answer is one that some have already started to employ with successful ROI results: A highly informed and phased methodology with a strategic twist – it is all based around performance. The datacentre should be looked at from the position of Infrastructure Performance Management (IPM). This involves looking at the infrastructure as a whole and then drilling down to focus on the areas that require work, such as growing applications. That way you get a view on what is working well, and where any changes need to be made. It’s also important to be informed about how legacy systems have dealt with issues in the past and to have absolute clarity on budgets and maintenance plans.

You can work with the infrastructure you have and take a gradual approach to applications and decisions about datacentre upgrades, while taking advantage of the many ‘try before you buy’ opportunities currently on the market. While maintaining some older technologies can still makes sense, trying to squeeze the most out of existing systems does not always make for the best economic decision in the long term.  Technology advancement has brought new solutions to the market that is a better, more modern substitute than an all-out replacement.

When it comes to datacentre migration and consolidation, it is always useful to learn from the experiences of others. A large Scandinavian bank is one such organisation that is no stranger to these challenges. It wanted to gain cost efficiencies by modernising its IT infrastructure to mitigate risk and ensure it continued to be competitive in the future. With thousands of business and personal accounts, it was crucial that transactions continued to run 24/7, so there was no option to switch off servers – as might be possible with other types of business – making maintenance windows limited.

The Storage Infrastructure team quickly realised that in order the make informed decisions during the migration and consolidation programme they needed to be able to monitor the entire infrastructure during the transformation. Using an Infrastructure Performance Management solution is invaluable for companies going through this period of change, allowing analysis and the collection of valuable data. Previous tools only showed the usage of storage, so if something went wrong it cost days, potentially weeks, locating the problem – real-time monitoring allows much better organisational control.

By monitoring their infrastructure, the bank was able to spot bottle necks in its storage area network and instantly find a solution. It also enabled them to pinpoint and utilise untapped existing resources such as thousands of unused ports, instead of purchasing new switches to accommodate, thereby making an immediate saving. In addition, the right IPM solution helps to ensure performance is maintained over mission critical applications, so vital for this industry. The bank introduced a programme of modernisation, including risk, change management and staff competency training. A steering committee reviewed risks each week. The modernisation programme for the infrastructure involved the relocation of a datacentre to negate proximity risks and following on from this they also decided to build an entirely new centre from scratch, using the lessons learned from the first move.

The organisation had managed to successfully integrate an entirely new storage solution, with automatic tiering. After thorough analysis, the relocation began with the aim to decommission the old hardware and close the datacentre to save cost. The old datacentre was 1,200 squares metres – the new one is only 230 square metres, which means it’s greener, more energy efficient and as everything is virtualised it uses less space.

The proximity risk was resolved, the Network, Storage, SAN, Server and Infrastructure were all modernised and virtualisation was introduced for the first time, reaching a level of 90% ratio by the end of the migration. In this highly complex programme the bank managed to move 1,600 pieces of equipment over a six month period, virtualised the system which significantly lowered costs and migrated the storage to new technology.

There is no doubt that this safe, high transparency, phased approach, adopted by some of Europe’s largest banks and financial services organisations, worked and has helped future proof their systems even within in the complex and fluctuating environment of the finance industry. Their experience proves that although the prospect of datacentre consolidation may sound formidable, with proper visibility, planning and management, better ROI and optimum level datacentre performance is an achievable outcome.

About Virtual Instruments  

Virtual Instruments delivers the industry’s only real-time Infrastructure Performance Management solution. The award winning VirtualWisdom® platform provides unparalleled visibility into the performance, health and utilisation of the entire open systems infrastructure – empowering customers to guarantee the performance and availability of their mission critical applications across physical, virtual and cloud computing environments. Through a unique combination of software and hardware, VirtualWisdom captures, persists, correlates, analyses and presents a breadth and depth of data never before possible.  This highly accurate and comprehensive view enables customers to stop reactive troubleshooting, start managing performance and achieve cost optimisation.  Virtual Instruments can be found online at http://www.virtualinstruments.com.

Banking

AML and the FINCEN files: Do banks have the tools to do enough?

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AML and the FINCEN files: Do banks have the tools to do enough? 1

By Gudmundur Kristjansson, CEO of Lucinity and former compliance technology officer

Says AML systems are outdated and compliance teams need better controls and oversight

The FinCEN files have shown that it’s time for a change in AML. We must take a completely new approach in order to catch up with the speed of innovation in financial crime.

Despite what you’ll read in news headlines, we can’t lay all of the blame for anti-money laundering failures at the doors of the banks. The majority of compliance teams are doing what they can, and what they are being asked to do.

Historically, AML has, in large part been a box-checking exercise. Banks have weaved through mountains of false alerts, investigated cases, sent SARs, and then got on with business as usual. In some jurisdictions, banks can‘t even interfere with customers under investigation, in fear of jeopardizing cases.

But the sentiment towards banks’ responsibility in AML is changing. They are increasingly looking at AML as a corporate social responsibility issue and even a competitive advantage. Banks are looking to protect their brands from the horrors of an AML scandal, and as such are taking a more proactive approach.

They are also throwing a lot of money at the problem. Deutsche Bank claims to have invested close to $1 billion in improved AML procedures and increased its anti-financial crime teams to over 1,500 people. Most big-brand banks have a similar story to tell.

With reputation on the line, better AML controls can become good business.

So where does the problem lie?

From the thousands of SARs discovered in the FinCEN files, lack of customer oversight is evident. Banks need to establish a method of knowing their customers through their actions across the organization and beyond the organizational walls. By doing so, banks can better understand AML and compliance risk, which gives them the necessary tools to bar customers from doing business or limiting their activity.

While banks are striving to better enforce regulations by pouring money and resources into CDD and transaction monitoring, forming this type of intelligent customer overview might be the real solution. Proper Customer Due Diligence and customer risk monitoring can only be achieved by continuously tracking customer behaviour and transactional networks. With the latest developments in Artificial Intelligence – that is now possible.

But, the reality for compliance teams is they are hindered by outdated technology in their risk assessment and transaction monitoring systems and because of this, banks are fighting a steep, uphill battle against serious organised crime.

In 2019, the Bank of England issued a statement that claimed: “existing (money laundering) risks may be amplified if governance controls do not keep pace with current advancements in technological innovation.”

I know from my time working as a senior compliance technology officer that many traditional AML systems are inefficient, slow and labour intensive, and often lead to inaccurate outcomes. In fact, most of the systems pre-date the iPhone, so they are using last-generation technology and techniques to detect criminal activity.

In short, legacy AML systems are not fit-for-purpose. Legacy vendors built them for the box-checking world of the past, and they are focused on one suspicious transaction at a time – rather than looking at ‘bad actors’ in the financial system, and patterns in their behaviour.

As launderers constantly evolve their techniques to circumvent rule-based or simple statistical detection, the AML systems market has not kept up. There is a dire need for innovation.

Unless systems are updated, banks can continue to file suspicious activity reports (SAR), but if bad actors can conduct their business ‘as usual’ and shuffle money around the globe to hide its malicious origin, the effectiveness of a SAR is significantly diminished.

What’s the solution?

I believe we need to rethink our entire approach to AML. We need to empower compliance departments with better controls and oversight, and move away from outdated, traditionally rule-based systems and towards a modern, AI-enabled, behavioural approach.

While the bad guys have learnt how to evade rule-based systems, they find it extremely difficult to get around AI algorithms that search for anomalies in behaviour. The advancement of AI algorithms, especially in the field of deep learning, provide an opportunity for banks to detect more complex and evasive money laundering networks.

So the answer is to establish continuous automated risk monitoring and implement a workflow system that provides money laundering risk scores for customers.

The latest AI software could kickstart a new age of customer AML risk-based overview. Instead of relying on static and self-reported KYC data, AI systems can analyse behaviour over a period of time and compare it with peer-groups and past actions. It provides compliance teams with a continuous risk-rating of their customers, actor insights and summaries to facilitate efficient and thorough investigations, and an organizational-wide overview.

Recent advancements in AI have not only made the above possible, but also practical. Our latest Human AI models contextualize and explain the appropriate data, making it easier for banks to spot sophisticated crime.

By looking at AML not simply as a box-ticking exercise, but as a competitive advantage that can increase customers’ trust in their financial institutions, banks have a lot to gain. Moving towards behaviour-based AML systems is a move towards making money good.

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Banking

Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild

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Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild 2
  • 23% of UK’s top performing businesses have been supported by local enterprise partnerships and growth hubs
  • Similarly, 30% of Britain’s strongest businesses have obtained external finance in the last 3 years
  • New findings come as part of an independent, holistic study into small business success, commissioned by Allica Bank to support British businesses

A new study, commissioned by business bank, Allica Bank, shows that a high level of engagement and interaction with external institutions and resources, is central to SMEs’ prospects of success.

The study analysed data from over 1,000 companies and ranked their success on a scale that evaluated factors including productivity, growth, consistency and outlook. To measure SMEs’ external engagement, survey respondents were asked whether or not they had engaged with local enterprise partnerships, growth hubs, or external financial advisers, as well as whether they had obtained credit or sought re-financing advice, in the last three years.

The benefit to small businesses in making the most of external resources are clear to see, with a quarter (23%) of the UK’s top performing SMEs – those in the top tenth percentile – actively engaging their local enterprise partnership or growth hub in the last three years. This compares to just 16% of all other small businesses. With such a clear benefit to businesses, these external networks must not only be protected but prioritised by any Government plans to rebuild the economy post-COVID.

Similarly, of the top performing SMEs in the country, 30% have obtained external credit in the past three years, compared to less than a quarter (24%) of all other businesses. This figure drops even further for the weakest performing businesses – those in the ninetieth percentile – where just 12% of businesses have obtained external financial support in recent years.

Chris Weller, Chief Commercial Officer, Allica Bank, said:

“At Allica Bank we understand that no two businesses are the same. We also know that no-one knows a business as well as its owners and managers. But they can’t be expected to be experts on everything.

“In the UK there is a wealth of external advice and support for small businesses and we urge each and every business out there to tap in to the external resources around them. Third-parties, such as business clubs, chambers of commerce, local enterprise partnerships and trade bodies, can be invaluable sources of advice and further resources. And although they have excelled in their given field, business owners may still lack knowledge in many other areas of running and growing a business. Therefore, engaging with third parties can give business owners the kinds of insight – and fresh perspectives – they need to succeed.

“As the economy and the country comes to terms with the impact of the COVID-19 pandemic, it is important these vital SME resources are protected and given the funding they need to continue providing invaluable insight and support to small businesses up and down the country.”

Allica Bank’s SME Guide to Success identified six ‘rules to success’ that were more likely to be displayed by top-performing SMEs compared to their counterparts. The full report contains a wealth of additional data and insight into each of these topics.

As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.

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Banking

Do we really need banks? Yes, but digital transformation industry-wide is vital

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Do we really need banks? Yes, but digital transformation industry-wide is vital 3

By Charley Cooper is Managing Director at enterprise blockchain firm, R3

The Coronavirus crisis has taught us that we are capable of going digital quickly when we need to. As the banking sector faces a second wave, the ability for individual firms to grow and succeed will be reliant on better connectivity and efficiency at the industry-level, writes R3’s Charley Cooper.

The sudden and dramatic pace of change has been seen globally over the last six months. Decades of paper-based practices are being updated, digitised and overhauled as the whole word adapts to working online. As of today, countries are accepting “alternative arrangements” for original paper export certificates, New York is allowing notary services by video, and global banks are accepting “original” documents and acceptances by email.

Over the coming months, we will see this digital transformation extend from individual use cases and firm-level deployment to entire industries. And perhaps in no other industry is this more critical than in financial services, where the role of banks continues to be challenged because of the inefficiencies they face as a result of decades of siloed technology deployment.

While unquestionably an improvement over reliance on manual processes, regular “digital transformation” as implemented by a single bank has limited benefits. These typically include greater automation of business processes, acceleration in adoption of electronic channels, elimination of manual processes, standardisation of non-value-adding business practices and a focus on driving up data quality and speed of information flows.

Now consider achieving digital transformation at the level of the entire market, rather than on a bank-by-bank basis. Whilst a digital transformation project for a single bank might automate a business process between a front and back office, a digital industry transformation project might optimise the trading and settlement of the asset between buyer and seller and their custodians too.

Of course, such things have been attempted before. But there have been many failures and the successes are notable by how they have resulted in new dominant centralised providers – for example for market data, messaging or settlement. The advent of blockchain architectures showed us there was a new way to tackle the problem, one that worked with the grain of existing markets.

Done right, the prize is a huge “productivity dividend” as entire markets are unshackled from their analogue histories.

Tackling interbank reconciliation at the industry level

The Italian financial services industry provides a pertinent use case of digital industry transformation. 32 banks in Italy went live in March with one of the first real-world deployments of enterprise blockchain technology in interbank financial markets. 23 more banks went live in May, with further institutions scheduled to go live this autumn. Built by the Italian Banking Association, ABI, the Spunta Banca DLT app on R3’s Corda Enterprise platform tackles the market-wide issue of interbank reconciliation.

The traditional reconciliation process for interbank transactions in Italy—formerly governed by the “spunta” process— is notoriously complex. Resolving mismatches in transactions is a labour-intensive process, hampered by a lack of standardisation, fragmented communication and no “single version of the truth.” The Spunta Banca DLT app automates the reconciliation process and enables banks to pinpoint mismatches in interbank transactions quickly by sharing common data in a secure way.

Connecting such a large and diverse group of banks in a live environment to tackle a shared problem is a major milestone for digital transformation in the Italian banking sector, providing a glimpse into a brighter, more efficient and interconnected future for all financial markets.

Changing mindset

The current crisis has accelerated the launch of digital technology for many use cases across a diverse range of sectors, but those that stand the test of time will be developed with an industry-level mindset, not firm-level.

It is now clear that the age of inter-bank optimisation is over – the path forward from this crisis will be paved by software that focuses on adding real value for entire markets, connecting banks to overcome the biggest challenges they share as an industry.

Banks must adapt and start thinking about technology in new and innovative ways if they are to retain their critical role in the global economy.

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