Related News

Swift says CBDC testing for trade payments showing positive results

Dollar alternatives not a major illicit finance threat, US says

Mitigram hires Swift’s Scheiman

HSBC picks Mendonca to lead embedded finance fintech

MonetaGo sets sights on “trade finance OS” with beefed-up board

More than half of compliance professionals worldwide are planning to increase their investment in regtech – technology to address growing regulatory challenges – in the next three to five years, a new survey has found.

The figures come from Swift and Dow Jones’ annual survey of more than 500 compliance and anti-money laundering professional around the world, assessing the current regulatory environment and its impact on organisations.

The focus on technology is, according to the survey, a response to a new geopolitical environment and rising regulatory scrutiny. Nearly 70% cited increased regulatory expectations as the greatest compliance challenge, followed by concerns about increased enforcement of current regulations.

A large majority – 75% of the respondents – also believe that the current geopolitical landscape presents new risks and challenges for preventing financial crime at their organisations.

“In general, political headwinds in Europe and America are creating a concern that things may change in terms of policy around sanctions for certain countries, leading to further changes of expectations on banks,” Paul Taylor, Swift’s director of compliance services, tells GTR.

To address the new challenges, 54% say they are likely to increase their investment in regtech, while nearly 60% answer that technology has already helped improve their ability to handle anti-money laundering (AML), know-your-customer (KYC) and sanctions requirements.

“The most pronounced changes between this year and last year’s responses is the willingness to invest in technology to address concerns around inefficient processes and the cost of compliance,” Taylor says.

He points to a growing take-up of KYC utilities, as well as an interest in using technology to detect money laundering threats and test existing control systems around sanctions.

“In addition, I think this year’s survey brings forward the culture point, with many voicing a concern around ensuring that they have quality, trained staff within their compliance operation. There was also a perennial concern voiced around false positive screening results, and false AML alerts,” Taylor says, referring to a part of the survey looking at AML-related organisational challenges.

Specifically, respondents express concerns about having enough trained staff (57%), relying on insufficient, inadequate or outdated technology (48%) and getting too many false positive alerts (46%).

These issues could be costly for the banks. As GTR reported recently, banks are squandering £2.7bn a year on chasing false leads – red flags that turn out to be innocent, generated by outdated legacy systems – costs that could be saved by using new technologies like machine learning and big data. The numbers were calculated by FortyTwo Data, an AML technology company, which concluded that on average, 55% of false positives can be eradicated with modern regtech solutions, accounting for 42% of banks’ cost on AML compliance.

In Swift and Dow Jones’ survey, OFAC and the EU’s 50 Percent Rule sanctions and the FinCEN Customer Due Diligence Rule – which are both new in the 2017 survey – are mentioned by over 70% of respondents as contributing to increasing workloads, while more than half cite FATCA, the Fourth EU Money Laundering Directive and other tax evasion legislation.

Read GTR’s latest cover feature on regtech.