Notably, financial criminals are evolving, with regulations also changing. This scenario has created the need for financial institutions to remain on top of their game to deter criminals in their tracks. Failure to put a solid proof financial crimes risk management system in place can be costly due to accompanying hefty fines. 

Financial crime is constantly evolving, and institutions are at risk of committing compliance mistakes and struggling to meet their regulatory obligations. Some of the mistakes happen despite persistent sensitisation on curbing the vices. However, below are vital guidelines vital for mitigating financial crimes.  

Leverage Technology 

Detecting fraud manually can miss out on some potential flaws. For instance, organisations can leverage AML detection solutions to automate the onboarding process. Such technologies cut out instances such as false positives and repetitive tasks while allowing more time to focus on serious threats. 

Ongoing Monitoring

This approach should be conducted in all business relationships and transactions, especially when a potential risk has been identified. A financial institution can use ongoing monitoring once unusual transactions outside the banking activity's regular pattern have been identified.

Regular Policy Update

An institution should commit to fine-tuning internal policies regularly. This ensures new emerging laws are embedded at every level of the business. Consider onboarding external experts to review your existing policies.

Open Communication

Employees should have an opportunity to speak up freely when they notice suspicious activities. The organisation can focus on offering employees relevant training to identify and manage financial crime threats while stressing the importance of observing the policies. 

Assessing And Understanding Risks

The financial institution should conduct a comprehensive risk assessment by considering all the relevant inherent and residual risk factors. Additionally, there should be appropriate mechanisms to document and provide risk assessment information to relevant authorities and agencies such as supervisors. 

Mistakes Financial Institutions Make In Handling Risks

  • Avoid the risk
  • Solving the risk halfway
  • Failure to follow internal policy
  • Failure to train internal teams

Technologies That Help In Financial Risk Management

Machine learning: This helps detect transaction patterns where the system acquires its own rules based on the data and patterns found. Notably, the technology is gaining prominence among various institutions. 

Cloud computing: This technology can help manage data for aspects like performing know your customer AML activities. Cloud computing also offers other benefits, like improved risk-scoring capability.

Graph analysis:  The purpose of graph analytics technology is to compare relationships between individuals. The technology deploys data analysis to show whether individuals present their true identity while engaging with a financial institution. 

Automation: An institution can acquire software, primarily robots, to study human sequence while interacting with the organisation. For instance, the technology can detect unusual activity while monitoring logins, click, and copy-and-paste actions to determine any specified sequence that might call for further investigation.

Factors To Consider When Selecting A Financial Risk Management Solution

  • Reliability 
  • Regulatory compliance features
  • User-friendliness
  • Security ​​

Endnote 

Financial crimes come at a cost, and there is a need to deploy various measures like state-of-the-art technology, analytics, and data management to meet compliance requirements. It is key to stay ahead of the curve to address changes more efficiently.