June 19, 2019 | Written by: Alistair Rennie
Categorized: FinTech | IBM RegTech Innovations
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While there is no prize for stopping financial crime (though, arguably there should be), occasionally there is recognition for being an integral and pioneering part of the overall financial crime management effort. Today, IBM has received recognition by Risk.net for both “Financial Crime Product of the Year” for IBM Safer Payments as well as “Best Vendor for Innovation.” And though we’re not here for the awards, this type of recognition does help validate that our new approach to how financial crime threats is not only innovative. It also shows that it’s working.
Thinking differently about financial crime management
There are no shortage of players in the overall financial crime ecosystem and each part of the financial services lifecycle – from new customer on-boarding, to payments to securities trading – has a collection of technology and service providers each with their own offerings. But I believe that our approach won out because of one word: agility.
This agile approach, whether in the context of payment fraud, AML transaction monitoring, insurance claims fraud or market abuse, helps our solutions adapt and continuously learn, giving our clients the support to better understand and separate legitimate activity from suspicious activity.
It is this agile approach that has also led us to incorporate techniques like machine learning, artificial intelligence, and automation into our solutions when others focus on one-dimensional strategies like neural networks, static models or anomaly detection. Each of these are helpful in spotting suspicious activity, but none are enough on their own. Our ability to use multiple strategies to help improve accuracy and operations can mean financial institutions have a reduced number of false positives they need to deal with, as well as respond to fraud and insider trading threats in real time.
But technology is only half the story. Or, more specifically, one-third of the story.
The three elements of risk and compliance innovation
To have success, especially in a specialized area like risk and compliance, we recommend you combine innovative technology, domain expertise, and the ability to successful connect these solutions, into the financial services organization’s complex technology and operational environment.
Looking at the myriad of vendors involved in the risk and compliance space, not all of them can claim to have mastered all three. Part of the reason is the breadth of expertise needed to span not only financial crime management, but also governance, risk and compliance (GRC) as well as financial risk management specialties. While these areas typically fall within the purview of the Chief Risk Officer or Chief Compliance Officer within an institution, they are owned by specialists who live and breathe these topic areas but may not necessarily be aware or concerned with the other areas. But that siloed mindset is changing.
The interconnectivity of risk
The idea of a 360-degree view of risk is one of the goals of the digital transformation that’s been taking place in the financial service industry over the last 20 years. Instead of a single consolidated effort to eliminate manual and paper-based risk processes, this initiative took time, and in some institutions is still happening.
But it also led individual risk and compliance specializations to implement different, isolated solutions to solve isolated problems as they arose, instead of a consolidated and coordinated effort with other risk areas. That has led to fragmented and siloed data, systems and processes. But the need to converge these risk specialties is coming more apparent as financial institutions come under increasing scrutiny by both regulators and the public.
Your trusted partner in risk and compliance
For a company like IBM that has such a long history of working with financial institutions, being seen as the innovator rather than the incumbent is a hard perception to break. But there are few partners that can provide both the breadth of capabilities – across core banking infrastructure as well as specialized areas from security to cloud to compliance to customer experience – as well as the domain expertise from decades serving banks, insurers and financial markets and regulatory insight from our colleagues at Promontory Financial Group.
We deeply appreciate the recognition from Risk.net as well as our financial services clients for their faith in IBM as well as our solutions. We look forward to continuously improving the way we serve them and their customers as a true partner and leading innovator. Read more about the awards here.