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U.S.EDITION July 2014

Famous comedian George Burns was once quoted as saying, “If you live to be one hundred, you’ve got it made. Very few people die past that age”. By 2050, it is estimated that there will be more than one million centenarians living in the U.S.1 For most people, planning for retirement or their later years is focused mostly on finances and how they will spend their time. However, ensuring they spend those years in good health is something that many overlook. The times are certainly changing, with medical advances and technological breakthroughs, planning for retirement and living longer needs to be more holistic.

In 1970, average life expectancy at birth in the United States was 71 years. In 2014, it is 79 years; and by 2050, the U.S. Census Bureau projects that average life expectancy will be 84 years.2 Today, according to  the National Institute on Aging, there are over 40 million people in the United States aged 65 or older, accounting for about 13 percent of the totalpopulation. In 1900, there were just 3.1 million older Americans,or about 4.1% of the population.3

The vast majority of babyboomers—those born between1946 and 1964—are on aquest to improve their oddsof living longer than previousgenerations. They not only wantto live longer, they want to livehealthily, happily and more financially secure than everbefore. Although there is no magic potion to ensure a long and healthy life, there are some notable accounts of individuals,families, and even whole communities that have defied the aging odds.

The holy grail of longevity

In one such amazing story, Stamatis Moraitis, a Greek veteran of World War II, narrates how he was diagnosed with lung cancer in the 1960s while living in the United States.4 He decided to forgo chemotherapy, and instead returned to his birthplace, Ikaria, the island where “people forget to die”. Moraitis abandoned his western diet and lifestyle and embraced the traditional island culture. His American doctors had told Moraitis he had only nine months to live, yet after moving to Ikaria he was still living— cancer free—45 years after his original diagnosis.

According to the story, he never had chemotherapy, took drugs or sought therapy of any sort. All he did was move home to Ikaria and embrace the local lifestyle. He claimed he even outlived his U.S. physicians who, decades earlier, had predicted his imminent death as the only plausible outcome of his devastating diagnosis.

Moraitis is not alone when it comes to longevity on the island of Ikaria. In fact, University of Athens researchers have concluded that people on Ikaria are reaching the age of 90 at two-and-a-half times the rate of their American counterparts.5

Stark differences in their lifestyle are apparent, even to a casual observer. Stress factors such as daily schedules don’t exist on Ikaria. Although the average Ikarian regularly performs vigorous activities, it’s never considered exercise. The island has a symbiotic attitude characterized by equal acceptance and accountability for everyone. Keeping up with the neighbors on the island of Ikaria translates into good health, happiness and wellbeing for all.

 Many traditional cultures with a strong ethnic heritage like Ikaria embrace the simplicities of life. The Ikarian diet is also a factor. It features fresh vegetables, fruits, herbs, spices and local honey, which are all products of weekly harvests that every citizen contributes to and benefits from, thereby maintaining a social structure that literally nurtures the entire community. The legacy of an Ikarian lifestyle may be the closest we have come to discovering the holy grail of longevity.

Obviously, the fast-paced culture and appointment-driven lifestyles of most Americans isn’t conducive to tending toabundant gardens or taking daily naps, both of which provide health benefits and are common practices in Ikaria. However, by recognizing what works in other cultures, it may be possible to find an acceptable middle ground to tip the scales in favor of a long and healthy life—no matter where you live.

Unlocking the door to longevity

To try to further understand the keys to longevity, a survey was conducted by Pollara on behalf of the BMO Wealth Institute to record and analyze the views of 1,000 Americans on various aspects of aging.6


The wide-ranging survey questions were focused around four aspects of life that many experts in the field of aging consider to be the keys to unlocking the mysterious door to longevity.

The four keys: body, mind, social and financial

Normal aging involvesan ongoing physiologicaltransformation. As your body and mind evolve and adapt,it’s helpful to re-evaluate bothyour physical and your mentalstatus, and to determine what

changes in your diet, exerciseregime and general lifestyle arerequired to promote ‘healthy’longevity. In addition, by putting the necessary tools in place as soon as you can to ensure that you have a strong retirement and financial plan and a solid social structure, you are more likely to seamlessly adjust to your senior years.

Although it’s never too late to make positive changes, keeping clear goals in sight is easier when good habits are formed and incorporated over a lifetime, rather than adopted as an afterthought. It’s critical that you devise a strategy that will help you remain vigilant about all aspects of your health, well being, personal life and financial assets. By consciously nurturing these four components, you can unlock your potential to achieve a long and rewarding life.

Key 1: The body: The master key that unlocks every other door

Good health is one of the basic elements required to achieve long life; without it, everything else is diminished. Now is the time to initiate the changes necessary to maximize your current and future health status.

Research conducted by Dr.Dean Ornish and his team at the University of California,San Francisco concluded that following a program of “healthy eating, exercise and stress reduction an not only reverse some diseases—it may actually slow down the aging process at the genetic  level.”7

In fact, longevity odds are greatly influenced by your personal lifestyle choices. Other aspects of good health should include:

  • Adequate sleep (7 to 8 hours per night, and naps as needed).
  • Regular stretching and deep breathing to keep your joints flexible and your body oxygenated.
  • Physical activity that includes both high- and low-impact exercise at least 3 times a week.
  • Drink at least 8 glasses of water daily.
  • Generous amounts of dark leafy vegetables, fresh fruits and whole grains in your daily diet.
  • Eliminating or reducing the amount of unhealthy fats, processed sugars and preservatives in your diet.
  • Consuming a moderate amount of alcohol (e.g., just a glass of red wine with dinner).

The BMO Wealth Institute survey noted that there is always room for improvement as we strive to increase our lifespan.

The most common initiatives are eating healthily (53%), exercising (49%) and visiting their doctor regularly (47%). Young people reported that they were less likely to visit their doctor regularly (33%).


When asked how they would rate their level of health based on their age, the majority of survey respondents considered themselves to be of average health for their age (60%), with approximately one-quarter saying their current level of health was above average (27%).  Approximately one in ten (13%) considered their health was below the average for their age. Men, and those in the 18–29 age category, were most likely to consider their current level of health to be above average.

Key 2: The mind: The fundamental key

Living your best life depends on a healthy brain. A recent article explores the best ways to improve your brain power for life.This article reveals that functioning to our fullest capacity is directly linked to the health of our brains. The article suggests that you incorporate these four fundamental lifestyle changes to boost your brain power.

  • Cognitive training: Memory, reasoning, and speed-of processing exercises create a winning combination for cognition.
  • Aerobic exercise: People who exercise moderately to vigorously just once a week are 30 percent more likely to maintain their cognitive function than those who do not exercise at all.
  • Don’t smoke: Non-smokers are nearly twice as likely to stay sharp in old age as those who smoke.
  • Maintain social networks: People who work, volunteer and maintain close-knit human bonds are 24 percent more likely to preserve cognitive function in late life.

The survey results revealed that loss of mental ability was the biggest concern that respondents had about living to 100 and beyond.  Below is a complete list of the feedback received when respondents were asked for their biggest concern about living to 100.

It’s a common myth that anolder brain is not as sharp asa young one. The good newsis that research tells us thatcomparisons between thehuman brain and computerssuggest otherwise. We must take into consideration that an older mind has stored and processed much more information over the course of a lifetime than someone in, for instance, their 20’s. Although the information is still accessible, at some point it begins to take longer to process, much like a well-used computer’s hard drive.

The brain, just like the musclesof the body, requires regularexercise to keep the mindsharp. Mature adults are rising to the challenge by adapting to the technology wave and incorporating activities that challenge the thinking process, including surfing the web, online gaming, and using an electronic reader to catch up on the latest book. There is no doubt that all of these activities sharpen your cognitive skills – the key to optimal mental health.


Key 3: Social: The key to enjoying life

The popularity of personal bucket lists has ignited a passion in seniors to take up new hobbies, write their life stories, or develop new careers. Senior wanderlust knows no bounds when it comes to fulfilling dreams after raising a family and retiring from a dedicated career. Survey results suggest there are a plethora of new activities respondents are interested in incorporating into their daily lives after retirement.

Spending more time on hobbies and starting part-time jobs were both shown to be highly desirable new activities on the list for many survey respondents and this is widely seen as a positive outcome. Researchers at the Institute of Economic Affairs in the U.K. recently identified a range of substantially negative effects on health after retirement. Their study found retirement to be associated with a significant increase in clinical depression and a decline in self-assessed health.  These effects were shown to grow as the number of years people spent in retirement increased.10


The encouraging link between continuing to work and longevity is exemplified in the Chianti region of Italy, located in Tuscany between the cities of Florence and Siena. In this famous wine region, the family-owned vineyards are often passed on from generation to generation. While the elders may leave the more taxing jobs to the youngsters, they never fully retire. The older members of the family continue to walk the rows of vines to make sure the grapes are in good condition and participate in tastings to ensure the quality of the wine, and they remain involved in important business decisions. Many locals claim it’s their ongoing daily involvement that is responsible for their exceptionally long and healthy lives.


If you’re looking to boost your level of social interaction, to supplement your income, or are seeking a productive way to fill your time, you may want to consider taking on a part-time job. The survey results revealed additional motives respondents suggested would influence their desire to work part-time after retirement.

We are all social creatures at heart. The simple act of a good conversation with a close friend or family member can provide acceptance, understanding, compassion and even an occasional wake-up call when necessary.

John Cacioppo, a University of Chicago social psychologist and neuroscientist who studies the biological effects of social isolation, has found that a lack of social connectedness leads to loneliness and can be linked to dramatic increases in stress, hardening of the arteries and inflammation in the body. Cacioppo and his research team also found that social isolation can diminish the brain’s executive function, learning and memory. There is no doubt that we all require ongoing social connectivity to maintain optimal health and longevity.

When contemplating expectations of increased involvement in current activities during old age, survey respondents cited social connectivity with family as their primary desire. In their golden years, those surveyed expected they will spend more time with family (57%), grandchildren (54%) and friends (50%), as well as keeping in close touch via phone or email (52%). A number of them (30%) also indicated that they would participate in volunteer activities in some capacity.


When asked what the most important factor was when it comes to enjoying an ideal lifestyle in old age more than one-third (36%) of respondents stated it was staying in contact with family and having a strong social support network. While financial security came in second, it was cited by 23% of the survey respondents as being the most important characteristic associated with an ideal lifestyle in old age— just above “having fun and doing activities I enjoy” (20%). Interestingly, financial security proved to be more important to women (27%) than men (19%), perhaps because women tend to live longer than men.


Key 4: Financial: The key to success

Americans clearly understand that an important component of successful longevity is having a sense of financial security.Although financial security was cited as a lower priority than maintaining a social network of family and friends for the majority of Americans surveyed, financial security gains importance with age and as personal assets increase over a lifetime. The survey results showed that those with the highest income levels expressed the greatest concern over their finances after retirement. The wealthiest plan to preserve their financial security above enjoying personal pursuits,

socializing, exercising and maintaining a healthy lifestyle.

Future health-care costs

While those surveyedacknowledged the potentialimpact of future health-care costs, few seemed to appreciatethe extent of the health-careexpenses that they will incur. Respondents also did not appearto fully understand that thereare proactive measures thatcan be taken to help minimizespiraling medical expenditures.Long-term care insurance is one such measure that may be part of the strategy to help curtail these expenses in the future. It may seem like peace of mind at a price, but not when you consider that currently there is a 70% chance of a retiree needing some type of long- term or in-home care as they age.11 The costs may vary a great deal by state; such that annual nursing-home care costs can range from $36,000 for a shared room to $72,000 for a single room.12

If you’re still in the active workforce and meet qualifying conditions, you may opt to open a health savings account (HSA) to help meet your future health-care expenses. These plans provide the opportunity to deposit funds and grow them on a tax-favored basis. However,the annual contribution limits of approximately $3,300 fora single individual or about$6,550 for a family reduces the account’s  overall effectiveness in covering the potentially high health-care costs in retirement.13

Below is a list of the expenses survey participants felt would most impact their senior years.

The state of health care and its associated costs are constantly evolving in the United States. Here are some steps you can take to keep pace with insurance industry and Medicare changes.

  • Review your plan annually to make sure you have the best coverage and health care available and that you aren’t paying for features that you don’t need.
  • Discuss your insurance coverage options with trusted professionals and compare costs to ensure you’re enrolled in the plan that best suits your specific medical needs.
  • Be aware that drug costs change drastically between plans. Switching coverage may also mean a change in care providers. If you’re committed to your personal physician or other specialists, make sure your insurance provider agrees before making a switch.


Overall, the majority of survey respondents anticipate the financial impact of health-care expenses to be significant as they age. In fact, Americans surveyed expected to spend an average of $5,822 a year on out-of-pocket medical costs after the age of 65.

This number appears to be quite accurate according to recent research conducted by the Employee Benefit Research Institute (EBRI).14 The EBRI found that Medicare generally covers only about 60 percent of the cost of health-care services (not including long-term care) for Medicare beneficiaries aged 65 and older, while out-of-pocket spending accounts for 13 percent of health-care expenditures (private insurance is an additional 14%). With that in mind, the EBRI estimates that a 65-year-old couple, both with median drug expenses, would need approximately $283,000 in today’s dollars to have a high probability of covering 25 years of future health-care expenses (excluding long-term care) in retirement.


Fail to plan — plan to fail

One of the easiest ways to increase confidence in your financial security is to work with a financial advisor to develop a retirement plan. Yet, those who have taken this important step are still in the minority. According to the Society of Actuaries, as of 2012, only one-third of pre-retirees have a retirement plan, and less than two-thirds (57%) of retirees have a plan.15

The survey results reflect this relatively low level of planning among pre-retirees, and at the same time demonstrate the comparative confidence that comes with a financial plan.  Of those surveyed who stated they were confident that they will be financially secure in their retirement, 27% have a financial plan, and 23% have discussed their situation with a financial advisor. For those that are not confident about a financially secure retirement, only 8% have a financial plan, and only 7% have consulted with a financial advisor. The survey appears to show that working with a financial advisor may increase your confidence in your ability to meet your financial goals in retirement.

The majority of respondents have made contributions to a retirement fund or 401(k) plan, often through employer-sponsoredplans. However, over one-third of Americans (34%)have not yet taken any steps to prepare for their retirement.

The following table shows steps that respondents to the survey have taken towards preparing for their retirement.


The need for financial security becomes more apparent as we age. When regular employment income is no longer part of the equation, the wealth accumulated during working years may help to fill the gaps. Uncertainty about the future of Medicare and Social Security has forced us to become more resourceful and to seek out other long-term solutions.

An important first step is to talk with a financial advisor who will work with you to develop a financial plan that, among other things, looks at your retirement income needs and ways to meet these financial goals that are in line with your tolerance for risk. By working together with your BMO financial professional, you can discover new doorways to financial security that may help to sustain you in your golden years.

A final thought

The compelling findings of the BMO Wealth Institute survey speak to the need for all of us to have a better overall plan when it comes to the four key components of longevity; body, mind, social and financial. Many challenges that may arise in our later years can be both anticipated, and properly planned for, by making smart decisions focused on the ultimate goal of successful longevity.

Certainly, there are lessons to learn from the resiliency found in the people of Ikaria. With little else to sustain their culture, value is placed on the most simple, yet endearing aspects of living a satisfying life—like interacting with neighbors and enjoying a good meal with friends and family. If attitude and fortitude were the most-valued assets, Ikarians might possibly be the richest people on the planet.



1 Living to 100? Giddan J, Cole E. The Huffington Post Blog, May 27, 2014. (accessed June 2014).

2 Life Expectancy–United States. Data 360. (accessed June 4, 2014).

3 Older Americans 2012: Key Indicators of Well-Being (Table 1a). National Institute on Aging, August 2012. (accessed June 2014).

4 The Greek island of old age. Bomford, Andrew. BBC News, Last updated January 6, 2013.

(accessed June 2014).

5 Sociodemographic and lifestyle statistics of oldest old people (>80 years) living in Ikaria Island: The Ikaria Study. Panagiotakos DB, Chrysohoou C,

Siasos G, Zisimos K, Skoumas J. Pitsavos C. Stefanadis C. Cardiology Research and Practice, February 2011. (accessed June 2014).

6 Survey conducted by Pollara for the BMO Wealth Institute between February 27, 2014 and March 3, 2014 with an online sample size of 1,000

Americans. Overall probability results for a sample of this size would be accurate to within 3.1%, 19 times out of 20.

7 Can lifestyle changes reverse coronary heart disease? Ornish D, Brown SE, Billings, JG, Scherwitz LW, Armstrong WT, Ports TA, McLanahan SM,

Kirkeeide RL, Gould KL, Brand RJ. The Lancet, July 21, 1990. (accessed June 2014).

8 What Is the Best Way To Improve Your Brain Power For Life? Bergland, Christoper. Psychology Today, January 21, 2014. (accessed June 2014).

9 Forget about forgetting: Elderly know more, use it better. Ramscar M. Universitaet Tubingen, January 20, 2014. (accessed June 2014).

10 Work longer, live healthier. Sahlgren GH. Institute of Economic Affairs, May 2013.,%20Live_Healthier.pdf (accessed June 2014).

11 Long-term care insurance: Peace of mind at a price. Waggoner J. USA Today, December 2, 2013. (accessed June 2014).

12 Genworth 2012 Cost of Care Survey, 2012. (accessed June 2014).

13 Resource Center: Health Savings Accounts (HSAs). U.S. Department of the Treasury, last updated October 18, 2013. (accessed June 2014).

14 Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News. Fronstin P, Salisbury D, VanDerhei J. Employee Benefit

Research Institute, October 2012. (accessed June 2014).

15 Retirement Planning in the Age of Longevity – Conference Proceedings. Stanford Center on Longevity, May 2012.

(accessed June 2014).

Securities, investment advisory services and insurance products are offered through BMO Harris Financial Advisors, Inc. Member FINRA/SIPC. SEC registered investment adviser.

BMO Harris Financial Advisors, Inc. and BMO Harris Bank N.A. are affiliated companies. Securities and insurance products offered are: NOT A DEPOSIT – NOT INSURED BY THE FDIC


BMO Harris Financial Advisors does not offer tax advice. Contact your tax advisor.

United States Department of Treasury Regulation Circular 230 requires that we notify you that this information is not intended to be tax or legal advice. This information cannot

be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing

of the planning strategies discussed herein. BMO Financial Group and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances

with your independent legal and tax advisors.

Estate planning requires legal assistance which BMO Financial Group and its affiliates do not provide.

BMO and BMO Financial Group are trade names used by Bank of Montreal.

About the BMO Wealth Institute BMO Wealth Institute, a unit of BMO Financial Group provides this commentary to clients for informational purposes only. The comments

included in this document are general in nature and should not be construed as legal, tax or financial advice to any party. Particular investments or financial plans should be

evaluated relative to each individual, and professional advice should be obtained with respect to any circumstance.

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TCI: A time of critical importance



TCI: A time of critical importance 32

By Fabrice Desnos, head of Northern Europe Region, Euler Hermes, the world’s leading trade credit insurer, outlines the importance of less publicised measures for the journey ahead.

After months of lockdown, Europe is shifting towards rebuilding economies and resuming trade. Amongst the multibillion-euro stimulus packages provided by governments to businesses to help them resume their engines of growth, the cooperation between the state and private sector trade credit insurance underwriters has perhaps missed the headlines. However, this cooperation will be vital when navigating the uncertain road ahead.

Covid-19 has created a global economic crisis of unprecedented scale and speed. Consequently, we’re experiencing unprecedented levels of support from national governments. Far-reaching fiscal intervention, job retention and business interruption loan schemes are providing a lifeline for businesses that have suffered reductions in turnovers to support national lockdowns.

However, it’s becoming clear the worst is still to come. The unintended consequence of government support measures is delaying the inevitable fallout in trade and commerce. Euler Hermes is already seeing increase in claims for late payments and expects this trend to accelerate as government support measures are progressively removed.

The Covid-19 crisis will have long lasting and sometimes irreversible effects on a number of sectors. It has accelerated transformations that were already underway and had radically changed the landscape for a number of businesses. This means we are seeing a growing number of “zombie” companies, currently under life support, but whose business models are no longer adapted for the post-crisis world. All factors which add up to what is best described as a corporate insolvency “time bomb”.

The effects of the crisis are already visible. In the second quarter of 2020, 147 large companies (those with a turnover above €50 million) failed; up from 77 in the first quarter, and compared to 163 for the whole of the first half of 2019. Retail, services, energy and automotive were the most impacted sectors this year, with the hotspots in retail and services in Western Europe and North America, energy in North America, and automotive in Western Europe

We expect this trend to accelerate and predict a +35% rise in corporate insolvencies globally by the end of 2021. European economies will be among the hardest hit. For example, Spain (+41%) and Italy (+27%) will see the most significant increases – alongside the UK (+43%), which will also feel the impact of Brexit – compared to France (+25%) or Germany (+12%).

Companies are restarting trade, often providing open credit to their clients. However, there can be no credit if there is no confidence. It is increasingly difficult for companies to identify which of their clients will emerge from the crisis from those that won’t, and whether or when they will be paid. In the immediate post-lockdown period, without visibility and confidence, the risk was that inter-company credit could evaporate, placing an additional liquidity strain on the companies that depend on it. This, in turn, would significantly put at risk the speed and extent of the economic recovery.

In recent months, Euler Hermes has co-operated with government agencies, trade associations and private sector trade credit insurance underwriters to create state support for intercompany trade, notably in France, Germany, Belgium, Denmark, the Netherlands and the UK. All with the same goal: to allow companies to trade with each other in confidence.

By providing additional reinsurance capacity to the trade credit insurers, governments help them continue to provide cover to their clients at pre-crisis levels.

The beneficiaries are the thousands of businesses – clients of credit insurers and their buyers – that depend upon intercompany trade as a source of financing. Over 70% of Euler Hermes policyholders are SMEs, which are the lifeblood of our economies and major providers of jobs. These agreements are not without costs or constraints for the insurers, but the industry has chosen to place the interests of its clients and of the economy ahead of other considerations, mindful of the important role credit insurance and inter-company trade will play in the recovery.

Taking the UK as an example, trade credit insurers provide cover for more than £171billion of intercompany transactions, covering 13,000 suppliers and 650,000 buyers. The government has put in place a temporary scheme of £10billion to enable trade credit insurers, including Euler Hermes, to continue supporting businesses at risk due to the impact of coronavirus. This landmark agreement represents an important alliance between the public and private sectors to support trade and prevent the domino effect that payment defaults can create within critical supply chains.

But, as with all of the other government support measures, these schemes will not exist in the long term. It is already time for credit insurers and their clients to plan ahead, and prepare for a new normal in which the level and cost of credit risk will be heightened and where identifying the right counterparts, diversifying and insuring credit risk will be of paramount importance for businesses.

Trade credit insurance plays an understated role in the economy but is critical to its health. In normal circumstances, it tends to go unnoticed because it is doing its job. Government support schemes helped maintain confidence between companies and their customers in the immediate aftermath of the crisis.

However, as government support measures are progressively removed, this crisis will have a lasting impact. Accelerating transformations, leading to an increasing number of company restructurings and, in all likelihood, increasing the level of credit risk. To succeed in the post-crisis environment, bbusinesses have to move fast from resilience to adaptation. They have to adopt bold measures to protect their businesses against future crises (or another wave of this pandemic), minimize risk, and drive future growth. By maintaining trust to trade, with or without government support, credit insurance will have an increasing role to play in this.

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What Does the FinCEN File Leak Tell Us?



What Does the FinCEN File Leak Tell Us? 33

By Ted Sausen, Subject Matter Expert, NICE Actimize

On September 20, 2020, just four days after the Financial Crimes Enforcement Network (FinCEN) issued a much-anticipated Advance Notice of Proposed Rulemaking, the financial industry was shaken and their stock prices saw significant declines when the markets opened on Monday. So what caused this? Buzzfeed News in cooperation with the International Consortium of Investigative Journalists (ICIJ) released what is now being tagged the FinCEN files. These files and summarized reports describe over 200,000 transactions with a total over $2 trillion USD that has been reported to FinCEN as being suspicious in nature from the time periods 1999 to 2017. Buzzfeed obtained over 2,100 Suspicious Activity Reports (SARs) and over 2,600 confidential documents financial institutions had filed with FinCEN over that span of time.

Similar such leaks have occurred previously, such as the Panama Papers in 2016 where over 11 million documents containing personal financial information on over 200,000 entities that belonged to a Panamanian law firm. This was followed up a year and a half later by the Paradise Papers in 2017. This leak contained even more documents and contained the names of more than 120,000 persons and entities. There are three factors that make the FinCEN Files leak significantly different than those mentioned. First, they are highly confidential documents leaked from a government agency. Secondly, they weren’t leaked from a single source. The leaked documents came from nearly 90 financial institutions facilitating financial transactions in more than 150 countries. Lastly, some high-profile names were released in this leak; however, the focus of this leak centered more around the transactions themselves and the financial institutions involved, not necessarily the names of individuals involved.

FinCEN Files and the Impact

What does this mean for the financial institutions? As mentioned above, many experienced a negative impact to their stocks. The next biggest impact is their reputation. Leaders of the highlighted institutions do not enjoy having potential shortcomings in their operations be exposed, nor do customers of those institutions appreciate seeing the institution managing their funds being published adversely in the media.

Where did the financial institutions go wrong? Based on the information, it is actually hard to say where they went wrong, or even ‘if’ they went wrong. Financial institutions are obligated to monitor transactional activity, both inbound and outbound, for suspicious or unusual behavior, especially those that could appear to be illicit activities related to money laundering. If such behavior is identified, the financial institution is required to complete a Suspicious Activity Report, or a SAR, and file it with FinCEN. The SAR contains all relevant information such as the parties involved, transaction(s), account(s), and details describing why the activity is deemed to be suspicious. In some cases, financial institutions will file a SAR if there is no direct suspicion; however, there also was not a logical explanation found either.

So what deems certain activities to be suspicious and how do financial institutions detect them? Most financial institutions have sophisticated solutions in place that monitor transactions over a period of time, and determine typical behavioral patterns for that client, and that client compared to their peers. If any activity falls disproportionately beyond those norms, the financial institution is notified, and an investigation is conducted. Because of the nature of this detection, incorporating multiple transactions, and comparing it to historical “norms”, it is very difficult to stop a transaction related to money laundering real-time. It is not uncommon for a transaction or series of transactions to occur and later be identified as suspicious, and a SAR is filed after the transaction has been completed.

FinCEN Files: Who’s at Fault?

Going back to my original question, was there any wrong doing? In this case, they were doing exactly what they were required to do. When suspicion was identified, SARs were filed. There are two things that are important to note. Suspicion does not equate to guilt, and individual financial institutions have a very limited view as to the overall flow of funds. They have visibility of where funds are coming from, or where they are going to; however, they don’t have an overall picture of the original source, or the final destination. The area where financial institutions may have fault is if multiple suspicions or probable guilt is found, but they fail to take appropriate action. According to Buzzfeed News, instances of transactions to or from sanctioned parties occurred, and known suspicious activity was allowed to continue after it was discovered.

Moving Forward

How do we do better? First and foremost, FinCEN needs to identify the source of the leak and fix it immediately. This is very sensitive data. Even within a financial institution, this information is only exposed to individuals with a high-level clearance on a need-to-know basis. This leak may result in relationship strains with some of the banks’ customers. Some people already have a fear of being watched or tracked, and releasing publicly that all these reports are being filed from financial institutions to the federal government won’t make that any better – especially if their financial institution was highlighted as one of those filing the most reports. Next, there has been more discussion around real-time AML. Many experts are still working on defining what that truly means, especially when some activities deal with multiple transactions over a period of time; however, there is definitely a place for certain money laundering transactions to be held in real time.

Lastly, the ability to share information between financial institutions more easily will go a long way in fighting financial crime overall. For those of you who are AML professionals, you may be thinking we already have such a mechanism in place with 314b. However, the feedback I have received is that it does not do an adequate job. It’s voluntary and getting responses to requests can be a challenge. Financial institutions need a consortium to effectively communicate with each other, while being able to exchange critical data needed for financial institutions to see the complete picture of financial transactions and all associated activities. That, combined with some type of feedback loop from law enforcement indicating which SARs are “useful” versus which are either “inadequate” or “unnecessary” will allow institutions to focus on those where criminal activity is really occurring.

We will continue to post updates as we learn more.

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How can financial services firms keep pace with escalating requirements?



How can financial services firms keep pace with escalating requirements? 34

By Tim FitzGerald, UK Banking & Financial Services Sales Manager, InterSystems

Financial services firms are currently coming up against a number of critical challenges, ranging from market volatility, most recently influenced by COVID-19, to the introduction of regulations, such as the Payment Services Directive (PSD2) and Fundamental Review of the Trading Book (FRTB). However, these issues are being compounded as many financial institutions find it increasingly difficult to get a handle on the vast volumes of data that they have at their disposal. This is no surprise given that IDC has projected that by 2025, the global “datasphere” will have grown to a staggering 175 zettabytes of data – more than five times the amount of data generated in 2018. As an industry that has typically only invested in new technology when regulations deem it necessary, many traditional banks are now operating using legacy systems and applications that haven’t been designed or built to interoperate. Consequently, banks are struggling to leverage data to achieve business goals and to gain a clear picture of their organisation and processes in order to comply with regulatory requirements. These challenges have been more prevalent during the pandemic as financial services firms were forced to adapt their operations to radical changes in customer behaviour and increased demand for digital services – all while working largely remotely themselves.

As more stringent regulations come in to play and financial services firms look to keep pace with escalating requirements from regulators, consumer demand for more online services, and the ever-evolving nature of the industry and world at large, it’s vital they do two things. Firstly, they must begin to invest in the technology and processes that will allow them to more easily manage the data that traditional banks have been collecting and storing for upwards of 50 years. Secondly, they must innovate. For many, the COVID-19 pandemic will have been a catalyst for both actions. However, the hard work has only just begun.

Legacy technology

Traditionally, due to tight budgets and no overarching regulatory imperative to change, financial institutions haven’t done enough to address their overreliance on disconnected legacy systems. Even when faced with the new wave of regulation that was implemented in the wake of the 2008 banking crash, financial services organisations generally only had to invest in different applications on an ad hoc basis to meet each individual regulation. However, as new regulations require the analysis of larger data sets within smaller processing windows, breaking down any and all data siloes is essential and this will require financial institutions that are still reliant on legacy systems to implement new technologies to meet the regulatory stipulations.

With this in mind, solutions which offer high-quality data analytics and enhanced integration will be key to the success of financial institutions and crucial to eliminate data silos. This will enable organisations to achieve a faster and more accurate analysis of real-time and historical data no matter where they are accessing the data from within smaller processing windows to keep pace with regulatory requirements, while also benefiting from low infrastructure costs.

This technology will also play a huge part in helping financial institutions scale their online operations to meet demand from customers for digital services. According to PNC Bank, during the pandemic, it saw online sales jump from 25% to 75%. Therefore, having data platforms that are able to handle surges in online activity is becoming increasingly important.

Real-time analysis of data

Tim FitzGerald

Tim FitzGerald

While the precise solution financial services institutions need will differ based on the organisation, broadly speaking, the more data they are storing on legacy solutions, the more they are going to require an updated data platform that can handle real-time analytics. Even organisations that have fewer legacy systems are still likely to require solutions that deliver enhanced interoperability to help provide a real-time view across the business and enable them to meet the pressing regulatory requirements they face. Let’s also not lose sight of the fact that moving transactional data to a data warehouse, data lake, or any other silo will never deliver real-time analytics, therefore, businesses making risk decisions based on this and thinking it is real-time is completely inappropriate.

As such, financial services firms require a data platform that can ingest real-time transactional data, as well as from a variety of other sources of historical and reference data, normalise it, and make sense of it. The ability to process transactions at scale in real-time and simultaneously run analytics using transactional real-time data and large sets of non-real-time data, such as reference data, is a crucial capability for various business requirements. For example, powering mission-critical trading platforms that cannot slow down or drop trades, even as volumes spike.

Not only will having access to real-time data enable financial institutions to meet evolving regulatory requirements, but it will also allow them to make faster and more accurate decisions for their organisation andcustomers. With many financial services firms operating on a global basis, this is vital to help them keep up not only with evolving regulations but also changing circumstances in different markets in light of the pandemic. This data can also help them understand how to become more agile, help their employees become productive while working remotely, and how to build up operational resilience. These insights will also be vital as financial institutions need to consider the likelihood of subsequent waves of the virus, allowing them to gain a better understanding of what has and hasn’t worked for their business so far. 


The financial services sector is fast-paced and ever-changing. With the launch of more digital-only banks, traditional institutions need to innovate to avoid being left behind, with COVID-19 only highlighting this further. With more than a third (35%) of customers increasing their use of online banking during this period, it is those banks and financial services firms with a solid online offering that have been best placed to answer this demand. As financial institutions cater to changing customer requirements, both now and in the future, implementing new technology that provides access to data in real-time will help them to uncover the fresh insights needed to develop new and transformative products and services for their customers. In turn, this will enable them to realise new revenue streams and potentially capture a bigger slice of the market. For instance, access to data will help banks better understand the needs of their customers during periods of upheaval, as well as under normal circumstance, which will allow them to target them with the specific services they may need during each of these periods to not only help their customers through difficult times but also to ensure the growth of their business. As financial institutions not only look to keep pace with but also gain an advantage over their competitors, using data to fuel excellent customer experiences will be essential to success.  

With the current economic uncertainty and market volatility, it’s critical that financial services are able to meet the changing requirements coming from all angles. With COVID-19 likely to be the biggest catalyst for financial institutions to digitally transform, they will be better able to cater to rapidly evolving landscapes and prepare for continued periods of remote working. As they look to achieve this, replacing legacy systems with innovative and agile technology solutions will be crucial to ensure they can gain the accurate and complete view of their enterprise data they need to comply with new and changing regulations, and better meet the needs of consumers in an increasingly digital landscape, whether they are located in an office or working remotely.

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