FircoSoft Vendor Highlights Report

Transcription

1 FircoSoft Vendor Highlights Report July 2013

2 About Chartis Research Chartis is a leading provider of research and analysis covering the global market for risk management technology. Our goal is to support enterprises seeking to optimize business performance through better risk management, corporate governance and compliance. We help clients make informed technology and business decisions by providing in-depth analysis and actionable advice on the broad spectrum of risk technology offerings. Areas of expertise include: Credit risk Operational risk and Governance, Risk and Compliance (GRC) Market risk Asset and Liability Management (ALM) and Liquidity Risk Financial Crime Insurance risk Regulatory requirements including Basel 2, Basel 3, Dodd-Frank and Solvency 2 Chartis is solely focused on risk technology giving it significant advantage over generic market analysts. Chartis has brought together a leading team of analysts and advisors from the risk management and financial services industries. This team has hands-on experience of implementing and developing risk management systems and programs for Fortune 500 companies and leading consulting houses. Chartis Research is authorized and regulated in the United Kingdom by the Financial Conduct Authority (FCA) to provide investment advice. No part of this publication may be reproduced, adapted, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Chartis Research Ltd. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Chartis Research delivers will be based on information gathered in good faith, whose accuracy we cannot guarantee. Chartis Research accepts no liability whatever for actions taken based on any information that may subsequently prove to be incorrect or errors in our analysis. See Chartis Terms of Use on RiskTech100 is a Registered Trade Mark of Chartis Research Limited RiskTech Quadrant is a Registered Trade Mark of Chartis Research Limited Unauthorized use of Chartis Research s name and trademarks is strictly prohibited and subject to legal penalties 2

3 Table of Contents 1- Executive summary Market analysis Drivers for change Technology requirements Leading practices from FircoSoft Technology capabilities Organizational capabilities Future direction Case studies Final thoughts Further reading

4 List of Figures Figure 1: FircoSoft filtering framework... 9 Figure 2: FircoSoft dashboards

5 1- Executive summary In the past, many firms felt powerless to prevent financial crime and simply wrote it off as the cost of doing business. In the last two decades, however, the combination of greater regulatory pressure and the increased costs of financial crime to firms have led to financial crime management becoming a much higher priority for firms. In particular, regulators have put increased pressure on firms to do more to prevent terrorism financing, money laundering, corruption, and tax evasion. As these requirements have become stricter and the volume of transactions has increased, it has become ever more difficult for firms financial crime management systems to meet these requirements. The cost of failure has gone up, through higher regulatory fines and increased public scrutiny leading to greater reputational risk. Firms need to adapt to this new world. In the past, they had focused on processing a relatively small number of transactions, on a batch basis, and accounts could be fairly easily traced. However, the rise of mobile and online banking has raised the volume of transactions, the speed at which they take place, and the ease of anonymity. These factors mean that firms need new approaches and technology systems for their anti-money laundering, anti-corruption, anti-terrorism financing, economic sanctions, and tax evasion programs. The widening of regulatory scope has also increased the volume of transactions and accounts that need to be screened. This will place increased pressure on resources in organizations that rely on manual review and workflow processes, creating much higher costs, much lower efficiency, and greater operational risk. To process greater flows of information, firms will need technology solutions that have been specifically designed to meet current and future challenges of screening processes, providing the right balance of feature sophistication and high-volume processing ability. As financial crime techniques evolve rapidly, state-of-the-art detection techniques with sophisticated filtering are necessary, with powerful, scalable screening abilities to enable the processing speed that operations require. Firms also want to avoid overwhelming volumes alerts generated by increased screening volumes. To meet the new filtering volumes, refined and flexible tuning of rules is required to minimize false positives and maintain manageable alert rates. Solutions also need a rapid production mode to eliminate false alerts quickly, while providing deeper investigation tools for potential true alerts. Automation of predictable steps should be considered, such as decision reapplication or routing alerts directly to the most appropriate reviewer. This often means focusing on best-of-breed solutions, rather than one-stop-shops. While many firms want to improve their overall financial crime systems, they know from experience that broad implementations are costly and take time. Where firms have a specific need for improved screening, a specialized screening tool, with focused development of real-time scalable capabilities, may be preferable to a one-stop-shop vendor with less sophisticated screening capabilities. This report covers the technology capabilities and systems that firms need to adapt to this changing environment, with a focus on watch-list filtering systems. The report covers new functionalities that firms need to implement to keep pace with technology changes and regulatory requirements, including real-time capabilities, risk-based approaches, and the ability to increase scale. This report also covers practices and technology solutions available from FircoSoft, a provider of watch-list filtering solutions. Chartis believes FircoSoft to be one of the leading vendors in the financial crime management marketplace. 5

6 2- Market analysis 2.1 Drivers for change Financial crime management, and anti-money laundering in particular, has gradually increased in importance for financial institutions and other organizations since it first came to prominence as a compliance requirement in the late 1980s. In particular, over the last five years there has been a renewed drive for improved antimoney laundering programs and systems. A number of internal and external factors have driven this process by changing the situation and the financial crime management challenges that organizations face. These factors include: Technology factors These primarily include the growth of new payment channels (mobile payments, online payments), the increased technological sophistication of criminals, and issues around scalability stemming from increased data. First and foremost, there has been considerable growth in digital banking channels, with mobile and online banking now occupying a significant portion of all transfers. The growth of these channels means firms need to process a much greater number of transactions at a much faster pace, requiring a more advanced approach to filtering. In many cases, criminals have moved faster than banks to exploit these technologies. Criminals are adept at utilizing the anonymity of online accounts to construct false identities and hide illicit transactions. Firms need greater cross-channel and online filtering capabilities to match criminals growing sophistication. Finally, these channels, combined with the impact of SEPA in the EU and the growth of Automated Clearing House (ACH) in the US, have increased the flow of data around transactions, requiring firms to process a greater volume of transaction data. Stricter regulation and supervision The regulatory pendulum has swung back towards stricter supervision throughout the financial system, with a range of new regulations emerging. Recent compliance failures around sanctions and money-laundering have strengthened this trend. The public has demanded action and regulators have handed out heavy fines accordingly. Other financial institutions, such as insurers, and non-financial institutions are also increasingly required to have KYC and CDD procedures. In addition to stricter supervision for money laundering, anti-corruption and tax evasion regulation have also increased the burden placed on firms. The US s new antitax evasion legislation, FATCA, has received the most publicity because it requires banks to do much more to track the accounts and transactions of their customers. There is also much stricter supervision and stronger requirements around tax information exchanges, anti-bribery, and anticorruption legislation. As the regulatory pendulum has swung back, supervisors are strengthening their focus on these areas. Dealing with all of these regulations can be difficult, and, as a result, compliance consultancy is growing within banks. Greater customer demands Customers now expect a higher standard from banks, both in terms of customer experience and in the bank s ethics. The increased use of online transactions has led customers to expect quick, efficient one-click transactions and convenient, fast transfers, without barriers. Firms need to strike a balance between facilitating a good customer experience and maintaining security, as customers also like to feel that their bank is secure and is not used to facilitate money laundering for criminals. Firms therefore need strong anti-financial crime systems that have low false positive rates and do not create too many barriers for legitimate customers. The increased costs of financial crime These factors have increased the cost of failure to prevent illicit transactions. Growing public mistrust of financial institutions has increased the cost of reputational risk, as failures now receive greater publicity and attract more criticism. Regulatory risk has also increased, as supervisors are more willing to hand down heavier fines and impose sanctions. Additionally, the risk of losses from criminals has increased as they grow more sophisticated and pose a greater threat to banks. 6

7 2.2 Technology requirements Together, these challenges around financial crime have created a new set of requirements for financial crime systems, in particular for watch-list filtering systems. Firms need to ensure their technology systems keep pace with technology changes and compliance requirements. The requirements will be different for financial institutions in comparison to other firms, as they face a higher number of transactions and stricter regulations. Financial institutions requirements include: High volume capability/scalability Integrated and expert cross-channel functionality Real-time filtering Risk-based approach Low false positive rate Increased productivity with online features to enable production-mode decision processing Improved alert management required via smarter workflow. Non-financial organizations requirements include: The ability to screen against negative news Anti-corruption lists Flexible systems to meet different needs in different locations Centralized systems to make the most of limited compliance resources User-friendly systems so that firms can process alerts with a very small team Real-time integration with operational system (e.g. CRM), also to improve efficiency Outsourced list management (automatic vs. manual list management) However, while the requirements differ, there are common features which both will require. These common requirements stem from the need to do more with less and to carry out filtering in real time. Both financial and non-financial institutions face more stringent compliance requirements and the need to process more transactions more quickly. At the same time, compliance resources are stretched. Technology systems therefore need to be user-friendly and have a degree of automation to help compliance professionals complete their tasks quickly and easily. Dedicated filtering solutions may be more capable of meeting these requirements than broader financial crime solutions. In particular, best-of-breed solutions will be more focused on enabling real-time screening of increased transaction volume, which is the key requirement for financial and non-financial institutions alike. Important foundation elements for a technology system will primarily involve getting the data in correctly. This includes both having a robust data management system for recording and processing transactions and ensuring that the system can upload and update watch-lists regularly. Detecting suspicious transactions relies on taking large amounts of incoming data and analyzing it at low latency. In a high data volume world, it is now an even greater requirement. 7

8 The data management system should be able to take in transaction data quickly and consistently, be able to reconcile data from different channels, be able to take unstructured data, take data from third party databases, and take regulatory feeds and databases from different jurisdictions. Storing data in a consistent format will be necessary to allow for cross-channel detection and to enable firms to check transactions against a range of watch-lists, while enabling feedback mechanisms. Firms need to keep a large number of watch-lists updated constantly so that they can screen customers and transactions in a systematic and automated fashion. Necessary watch-lists include sanctions lists of prohibited entities, such as countries currently under UN sanctions, or individuals, such as terrorists, as well as lists of Politically Exposed Persons (PEPs). Firms are obliged to enforce watch-lists, and will face regulatory consequences if they violate them. Official international and national lists include the US s Office of Foreign Assets Control, the Bank of England, and Canada s Office of the Superintendent of Financial Institutions. Firms are not necessarily prohibited from trading with PEPs, but need to carry out enhanced due diligence on these individuals. The key requirements for watch-list filtering are keeping these lists up-to-date and ensuring low false positive and false negative rates. The former is a data management issue. Firms need to take regulatory feeds and feeds from external databases and to update lists in real time. They also need to screen new and existing customers to ensure their compliance programs are up-to-date. Filtering requires a mix of analytics. Customers and transactions need to be screened against a set of data, including names, location, date of birth, and other relevant information. This can be done either in real-time or in batch processes, but, facing a higher number of transactions and under greater regulatory pressure, many firms are seeking to upgrade to real-time screening. For both financial and non-financial institutions, real-time and automated screening will reduce the burden on compliance teams, allowing them to do more with less. Another key challenge for screening solutions is to deal with the number of different spellings and alphabets of names/locations etc. attached to customers and entities. These factors can lead either to over-cautious systems or can lead to a high false positive rate or systems that only screen for direct matches having a high false negative rate. To deal with this, leading technology solutions are using advanced transliteration programs for data originally entered in a different alphabet to the one used by the bank so that all possible spellings are provided. Risk-scoring analytics will also help firms to prioritize cases and reduce the number of false positives. Leading solutions are also offering fuzzy matching techniques to screen for similarly spelled names and reduce false negative rates. The ability to handle unstructured data also allows firms to build up a richer profile to screen against. To reduce false positive rates, firms can use manual updates to create white lists of trusted customers, or machine learning and artificial intelligence capabilities. Using feedback mechanisms to update systems automatically reduces false positive rates and reduces the number of investigations that compliance teams need to carry out, allowing firms to improve security, the customer experience, and efficiency. Improved efficiency can also be achieved by integrating with other systems, such as customer intelligence systems, and improving workflow and alert systems. Integrating financial crime systems with CRM systems can allow compliance professionals to access information that will build up a clearer picture and may prevent a false positive. Intelligent workflow and alerts can be linked to risk-scoring, helping users to prioritize the most important and riskiest cases, reducing false positives and the workload of compliance teams. At the same time, the need for integration should not necessarily bounce firms into purchasing purported end-to-end financial crime risk management systems. While one-stop-shop vendors can offer advantages in providing joined-up financial crime management, best-of-breed vendors will provide deeper functionalities to address specific business needs. The choice is between breadth and depth of coverage and firms will need to implement systems which meet their needs. A focused approach may work better if a firm s manual approach is becoming inefficient or if it is struggling to meet regulatory requirements. Firms that need to improve their whole systems may want to implement end-toend systems; those that have specific requirements for faster, higher volume filtering should look at the best-ofbreed vendors that have the deep functionality required to meet current market and regulatory requirements. 8

9 3- Leading practices from FircoSoft FircoSoft is a vendor of watch-list filtering solutions that was founded in The firm works closely with its customers to keep ahead of regulatory changes and eliminate the risk of fines and reputational exposure. More than 600 customers, including a number of major financial institutions, use FircoSoft solutions to filter customers and transactions against sanctions and watch-lists to ensure compliance and meet KYC requirements. FircoSoft has offices in New York, Tampa, São Paulo, London, Luxembourg, Paris, Zürich, Chennai, Singapore, and Melbourne. Together with its global partner network, FircoSoft provides services, support, and expertise to 2000 customer sites in over 70 countries. 3.1 Technology capabilities FircoSoft provides a transaction-centered watch-list filtering solution, Firco Continuity, a KYC and EDDcentered filtering solution, Firco Trust, and Firco Due Diligence, which provides a pre-packaged KYC and EDD solution for smaller organizations. It also provides Firco List Service, which offers subscription-based access to sanction lists and other content that optimize the usage of the solution. These solutions form an integrated watch-list filtering solution, based on FircoSoft s powerful filtering engine. The products can filter against multiple lists: any sanction list (such as EU, OFAC, HMT, and UN), as well as third-party lists and internal watch-lists. Firco List Service ensures that the required lists are delivered to customers and are kept up to date. As FircoSoft is dedicated purely to screening and filtering, it has invested heavily in developing functionalities to meet the requirements of firms with high data volumes and the need for high performance. FircoSoft provides dedicated list maintenance, sophisticated filtering, scalability, and a workflow designed to improve the speed and efficiency of screening and decision-making. Its technology capabilities led to Chartis s decision to rank it as a Best-of-Breed vendor in the Chartis Anti-Money Laundering Solutions 2013 report. In particular, Chartis highlighted FircoSoft as a best-of-breed vendor for watch-list filtering. At the same time, FircoSoft solutions can be fully integrated with banking applications through a series of standard connectors to receive transaction data and customer data. The filter accepts any text formats but handles SWIFT, FEDWIRE, CHIPS, SIC, ACH, and XML as native format. The filter will process those fields specifically, for instance some fields can be excluded from the scan to reduce the false positive hit rate. This data is then compared to watch-lists and rules loaded onto the system and fed into the filtering engine. Figure 1, below, illustrates the solution framework and how alerts are generated. Figure 1: FircoSoft filtering framework 9

10 The FircoSoft filtering engine is not based on defined business rules, as it uses embedded fuzzy logic matching. There are also 33 algorithms built into the engine, which can be turned on or off to influence the behavior of the filter. However, business rules are used to apply the business logic automatically and the solution includes a rules editor that allows users to create business rules and set parameters based on their business requirements. This allows them to reduce false positives and to optimize the filtering process. The filtering engine itself uses its mixture of algorithms and fuzzy logic to provide real-time screening. The engine uses a risk-based approach that can be configured to the bank s risk appetite. The engine compares words from each transaction against consolidated lists, using fuzzy logic search on names and geographic information (such as sanctioned countries) and string matching search on, for example, passport numbers. The filtering engine then retains matches that contain enough relevant information to generate an alert. In addition to filtering transactions against watch-lists, the solution also automatically blocks wire transfers that have been stripped of identifying information to evade detection. This automated approach prevents firms from exposing themselves to the risks of amended payments and improves productivity by removing the need for manual identification of those amended payments. The filtering engine also includes advanced transliteration capabilities to support organizations that need to carry out screening across different alphabets, including the capability to detect and block Chinese Telegraphic Codes (CTC, CCC) in financial transactions. The engine has a number of important features that support the current requirements of financial and nonfinancial institutions. The development of this engine has been supported by FircoSoft s focus on filtering, which has allowed it to concentrate on improving its ability to screen high volumes of data in real time. The solution is highly scalable and provides real-time capabilities to support the needs of firms to filter a high volume of transactions in a short amount of time. The solution is capable of screening five million transactions per day and 100 million customer accounts per screening and can determine in milliseconds whether a transaction or customer is high-risk. Once a hit is detected, the transaction is put on hold until a user reviews and investigates to decide to pass or fail it. This best-of-breed capability enables users to quickly and efficiently carry out screening. Moreover, the filtering engine and solution as a whole is flexible and highly configurable so that the sensitivity of the filter matches the firm s risk appetite. Using routing rules, the solution can send messages to filters configured at different risk levels, i.e. a low value, low risk ACH message would be sent to a filter configured for low risk settings and a high value to a filter configured for high risk. The specific algorithms can be turned on or off to configure the filter and the solution also includes an offline modeling and testing mode. This allows users to manage business rules and test their filters to ensure that their false positive and false negative rates are sufficiently low. The testing environment includes a central repository for all the lists, so that testing is as accurate as possible. Users have the ability to configure different filtering settings to match the risk policy for each business line, such as for different filtering settings for different demographics. The solution can segregate data between regions and business lines so that each transaction is associated with a unique unit by the banking application. A user can belong to several units and user actions are allowed based on user access rights and the status of a message. The decision workflow is also customizable to match diverse business processes. Users can customize screens to adapt to their business needs and individual preferences. FircoSoft s Workflow Accelerator assigns alerts directly to experts to reduce human errors and mistaken routing and to improve the decision-making process by removing redundant steps. As FircoSoft is a dedicated watch-list filtering provider, it knows the pressures firms are under in trying to screen higher volumes with manual processes. FircoSoft s workflow solution is designed to help firms move to a more automated approach and improve the efficiency of manual processes. Message pairing, in which several messages from the same transaction are filtered as a whole, reduces the number of decisions that need to be made and improves efficiency. Figure 2, below, demonstrates FircoSoft s dashboards, which gives a clear view of the most important alerts in real time. The dashboard functionality streamlines the decision-making process and enables users to address potential issues before they become a problem. The workflow solution allows screening specialists to make better use of their time, by ensuring that they receive the right alerts and the necessary information, without becoming bogged down by duplication or irrelevant messages. 10

11 Figure 2: FircoSoft dashboards 11

12 To reduce false positive rates FircoSoft s solutions provide both manual and automatic feedback systems. The filtering solution provides firms with information on which transactions, individuals or rule types are creating the most false positives and with the tools to suppress them. First of all, firms are able to create white-list entries. Exceptions can be created for entries that provide false positives because of their similarity to known criminals sanctioned individuals, or PEPs, but have no actual connection to suspicious individuals. These can be technical (in order to prevent hits on common strings) or business (trusted customers where the KYC has been completed). Users are also able to write business rules to adjust the hit-rates and reduce false positives. Additionally, the solution includes decision reapplication processes. This means that the solution can remember the decision taken by the user to let a transaction go through and will therefore not create new alerts for similar transactions from the same customer. This automation reduces false positives and reduces the workload of the compliance team. 3.2 Organizational capabilities FircoSoft s technology capabilities are complemented by its organizational strengths that enable it to provide its solutions to firms worldwide. In particular, FircoSoft tailors its implementation and support to ensure that firms in different jurisdictions, in different business sectors, and of different sizes are able to use its solutions effectively and efficiently. FircoSoft has adapted its implementation strategy to address the needs of organizations outside of the traditional Tier 1 banks normally targeted by technology vendors. The strategy is exemplified by Firco Due Diligence, which provides small banks and corporates with a pre-configured and pre-packaged KYC and EDD solution. This means these organizations can purchase and implement the solution at relatively low cost, while complying with regulations and filtering new customers effectively. More broadly, FircoSoft has built its partner and reseller network globally to give it greater reach so that it can implement and maintain its solutions for clients around the world quickly. As a result, FircoSoft has been able to build, implement, and maintain its filtering solution at 2000 sites in more than 70 countries, primarily in Europe and the Americas, but with a growing number of clients in Asia, the Middle East, and Africa. FircoSoft s organizational capabilities mean that it has been able to record steady growth in revenue and profitability. This has allowed FircoSoft to re-invest in its technology solutions. FiroSoft s investment in R&D has risen by 40% over the last year so that they can expand their technology solutions into new areas and new regions. 12

13 3.3 Future direction FircoSoft has recently invested to develop new functionalities and has also acquired technology and talent from Telovia, a provider of compliance and due diligence solutions. These investments will help FircoSoft to expand its offering to provide greater financial crime management capabilities. In particular, FircoSoft plans to grow in the following areas: Firco FATCA FircoSoft s FATCA solution, to launch this year, will provide firms with the ability to meet these new regulatory requirements by performing a detailed analysis of the existing customer base to check for potential risks and by capturing documentation and carrying out analysis on new customers. The solution will also provide a reporting module to send details of assets and transactions to the US authorities. Firco Intelligence This is FircoSoft s cybercrime investigation solution, which will launch in The solution is designed for use by law enforcement agencies and will use internal and external databases. The solution will be able to track cyber-criminals by using correlating facts from numerous investigations and gathering information from various sources. Firco Panorama Firco Panorama has become a part of FircoSoft s portfolio and will be launched as an integrated part of the FircoSoft suite in Panorama is a specialist case management environment that enables users to investigate and to carry out on-going due diligence. The solution will provide the ability to investigate and validate Ultimate Beneficial Owners. The solution provides a smart workflow and includes self-learning capabilities, so that previous decisions inform decision making. The acquisition of technology and talent from Telovia provides FircoSoft with deep domain expertise and best-of-breed technology in this area. 13

14 4- Case studies Case study 1 Brown Brothers Harriman 2010 Brown Brothers Harriman, an American investment bank, was an existing FircoSoft customer who contacted the company because it needed additional technological capabilities to meet increasing regulatory requirements. Specifically, its AML Compliance department needed improved functionality to comply with the Financial Crimes Enforcement Network (FinCEN) agency s requests for information. Brown Brothers Harriman receives a 314(a) request for information from FinCEN every two weeks that requires the firm to search for possible data matches in their customer account records for the preceding and current 12 month period and in transactions conducted in the last six months. If any matches are found between the firm s records and what FinCEN is searching for, the results need to be returned in 14 days. Previously, the firm had used spreadsheets to manage the process. Business lists and the 314(a) list were downloaded for manual configuration before filtering. Although this process worked initially, it was fragmentary and lacked consistency, creating operational and regulatory risk. It also relied too heavily on manual input, making the process inefficient and time-consuming. The firm decided to implement Firco Filtering Suite in order to solve these issues. The firm selected FircoSoft s solution primarily because of its ability to automate this process. The flexibility of FircoSoft s list management allowed the solution to import, update, correct, and enrich the 314(a) list as it came in and to compare it against the firm s data. Every two weeks, BBH scans 60 million transactions and 1.5 million account records in less than 4 hours, extracting the data from their in-house brokerage application. The results are then converted into a report that can be sent to regulators. The solution has reduced the time and resources required for the process, while maintaining the quality of the process. Case study 2 West LB 2010 WestLB (now Portigon Financial Services), a European bank, needed to improve its technology systems to comply with the new requirements surrounding the introduction of the Single European Payments Area (SEPA). SEPA will require all electronic payments to be counted as domestic transactions and European banks will need technology to support SEPA payments in place by WestLB s existing filtering solution was unable to detect the new SEPA formats, which meant that it could not screen them, and was also struggling to cope with higher volumes of data. The bank needed a scalable solution that could meet compliance requirements. The bank selected Firco Continuity to filter its SWIFT messages and SEPA transactions in one environment. SWIFT transactions could be filtered against official sanctions lists including OFAC, EU, UN, Bundesanzeiger Verlag, DFAT and OSFI. The filtering of SEPA transactions was enabled by the introduction of Firco Unique Format, which allows Firco Continuity to screen new format types. The solution was also configured to be able to filter more than 2 million transactions a month by centralizing multiple filters. A web-based user interface enables compliance staff from around the world to manage alerts flexibly. 14

15 Case study 3 Large consumer goods multi-national 2012 A large, multi-national consumer goods firm implemented the Firco Trust solution for its customer and vendor screening needs and the Firco List Service (FLS) to manage and validate its selection of watch-lists. The firm did this in order to meet compliance requirements. Previously, its approach to filtering had been largely manual, making it time-consuming and not user-friendly. Compliance staff found it difficult to carry out filtering processes effectively. The firm therefore decided to implement a filtering solution and drew up a set of criteria for selecting a solution. The requirements included: The ability to support a variety of data feeds The ability to support any watch-list The ability to avoid duplication Flexibility when reviewing hits International, multiple language capabilities Vessel number screening Integration capabilities The firm believed that FircoSoft s solutions met these requirements and that they represented a best-of-breed system capable of carrying out the required filtering tasks. 15

16 5- Final thoughts After many years of light-touch supervision, the regulatory pendulum has swung firmly back in the other direction over the past few years. The trend for stricter regulation and supervision is not going away any time soon, and neither will the increasing volume of transactions, nor the trend towards digital banking and transfers. Firms, both in and outside the financial sector, need to adapt to this new environment. These trends have made it necessary for firms to improve their financial crime processes and systems. Although many organizations have reacted to the demands of regulators, a great deal still needs to be done to meet the business requirements, as well as compliance. In particular, organizations need to improve the efficiency of these processes in order to allow financial crime management professionals to spend more time on investigations, rather than manual screening. Improved technology systems will therefore be a key enabler from improved financial crime management. While firms face significant challenges, there are technology solutions that can reduce compliance burdens and improve their management of financial crime, particularly in the area of watch-list screening. Increased automation and the reduction of false positives will allow firms to improve productivity, improve the customer experience, and do more to prevent genuinely suspicious transactions. In choosing financial crime technology solutions, firms will need to examine their needs before judging vendors. Different firms have different challenges and should focus their spending accordingly. Best-of-breed technology vendors may be more appropriate for firms looking to improve their screening processes. These vendors, such as FircoSoft, will have more sophisticated filtering engines, greater dedication to keeping lists up-to-date, and higher performance. Equally, current technologies also offer firms the opportunity for joined-up financial crime management, an opportunity that should not be neglected. Placing filtering solutions in a wider financial crime management system will help firms to tackle other compliance requirements and prevent other types of financial crime, reducing losses. If firms do implement best-of-breed solutions, they should ensure that these solutions have the integration capabilities to link them into firms broader financial crime management technology architectures. Best-of-breed capabilities, integrated into a joined-up financial crime architecture, will allow firms to improve screening processes and results and to use sophisticated filtering technologies to provide better information to other financial crime systems. Firms should not see improving financial crime management solely as a regulatory requirement, but as the opportunity to achieve business goals by cutting losses from crime. Chartis believes that firms that implement innovative technology solutions will be well-placed to deal with compliance requirements and gain competitive advantage through greater productivity and reduced exposure to financial crime. 16

17 6- Further reading Anti-Money Laundering Solutions 2013 Enterprise Fraud Management Solutions for Financial Services 2013 Operational Risk Management Systems for Financial Services 2013 Enterprise GRC Solutions 2012 Collaborative Risk Management Basel 3 Technology Solutions 2012: Horses for Courses Global Risk IT Expenditure 2011 RiskTech For all of these reports see: 17