The Future of Conduct and Compliance in Australia
Written by Shaun Mathieson
Published: 4th Sep 2019
As the final report of the Royal Commission into banking lifts the veil on a history of malpractice within the Australian financial services sector, there are some significant changes occurring out there. The focus of the commission was on conduct, shining a light on the treatment of customers by Australia’s largest financial institutions. The findings have been far from favourable.
Additionally, in the wake of the $700m enforcement action vested upon the Commonwealth Bank of Australia (CBA) by AUSTRAC last year, the financial crime compliance functions within the banks have been shaken to their core.
Over the past year, three of the Big Four Australian banks have established new financial crime leadership teams (and in some cases, Chief Risk Officers), often bringing in fresh talent from overseas. Millions of dollars have been spent on consultants, largely focusing on identifying weaknesses in the operating models of the compliance teams, including reporting lines and accountability structures. The ownership and management of regulatory risk within the banks is being redefined.
Alongside these operational and strategic change programs, under-performing – and yet highly expensive – financial crime compliance technology suites have also now been brought under the spotlight. Patches, fixes, upgrades and extensions are underway to keep the wolves at bay, and beyond this tactical remediation work the banks now have a sharp focus on building towards a a progressive future state.
A Lack of Visibility
Whether we are looking at the findings of the Royal Commission, the AUSTRAC enforcement action at CBA, Australia’s involvement in the global markets rigging scandals or any other issue which comes out of the woodwork to haunt the banks, the root cause is a lack of visibility and therefore control. That said, culture too plays an important part in all this.
Stories about our banks facilitating the laundering of drug money, rigging FX rate benchmarks and ripping off customers don’t paint a pretty picture. However, anyone who works in the industry understands that the problem is far more complex than willful dishonesty at the top table. Knowing what criminal activity or misconduct is going on beneath the surface sounds very simple but is in fact extremely difficult to achieve.
Tier one banks are big, complex, well-funded organisations which have seen fast and furious (but sometimes disorganised and chaotic) growth. In the same way that organs and oxygen make life possible for humans, technology and data do so for modern banks. The result of many years of investment in technology and burgeoning growth is a mind-boggling and highly complicated technical landscape with vast data integrity challenges. In this digital labyrinth, simply gaining an accurate holistic view of an employee or customer, as well as seeing the extent of their behaviours and connections (let alone properly understanding them), is like solving an insurmountable puzzle, where every tiny move costs big bucks and takes time.
When you start to get your head around the scale of this maze of data silos and then layer on tens of millions of customers, tens of thousands of employees, countless products, billions of transactions and an endless tsunami of complex and often ambiguous regulations, then the lack of visibility which modern tier one banks struggle with becomes easier to appreciate.
So where do we go from here? Starting again and rebuilding the bank is not an option.
The Future of Modern Banking in Australia
The good news is that recent innovations in the way big data is used are enabling the world’s largest banks to stitch all this complexity together, resulting in a holistic and dynamic view of customers, counter-parties and employees across a myriad of disjointed internal systems and external data sources. This provides the banks with an amazing platform to deploy artificial intelligence and advanced network analytics across a connected fabric of systems, allowing them to truly understand the behaviours and relationships within their data. When behaviour is surfaced and understood, visibility and control are regained.
Finally, we must also remember that despite the recent difficulties, our banks are full of intelligent, motivated and talented people, the vast majority of whom have good intentions. If we arm them with the right technology and give them access to the right data at the right time, then the prospects of an embattled sector start to look more promising.
You may be interested in…
Context and the fight against forced labor, modern slavery and human trafficking
How Banks Can Use Data to Emerge From the Crisis Ahead of the Competition
Banks are among those hardest hit by the pandemic. Find out how to seize the opportunity to accelerate out of this crisis and emerge more profitable and well-balanced organizations
How to Adapt to a Changing World Using Situational Awareness
As COVID-19 continues to impact our global economy, financial institutions are under increasing pressure to service unprecedented demand from their business customers. Situational awareness empowers you to overcome new challenges, protect your organization against emerging threats, and seize new opportunities.
How can we overcome the threat of mule fraud during COVID-19? (Part 1)
The way in which criminals operate is shifting as a result of COVID-19. Financial institutions must adapt to change quickly to prevent criminals from using mule fraud to take advantage of the vulnerable.
AML for financial markets: The paradigm shift to contextual monitoring
Industry expert Scott Nathan, Head of Innovation for AML and Risk at State Street, has been working with Quantexa on a new approach to AML in markets, one that harnesses contextual decision intelligence for more efficient and effective risk detection in financial markets.
COVID-19, organized crime and managing financial crime threats
As many legitimate businesses worldwide continue to adjust to new ways of working during the COVID-19 pandemic, criminal organizations are ahead of the curve in adapting their operations to take advantage of arising opportunities.
Reveal hidden risks and detect criminal activity faster. Reduce false positives to manage the cost of compliance. And improve investigations to make faster and more consistent decisions at scale.
Identify potentially fraudulent activity by looking at people or transactions in isolation. Understand the context surrounding the organizations you do business with to make fast, accurate decisions.
Understand your customers, their business structures and supply chains. Make better lending decisions, faster. And support digital risk transformation.
Know Your Customer
Reduce significant manual effort across onboarding, refreshes and remediation. Automate checks, implement continuous monitoring, and focus on contextual decision making.
Generate a complete view of the context around your customers and prospects to build better relationships, reduce attrition and find hidden opportunities.
Master Data Management
Connect all data—internal and third party—to create a joined-up, contextual view of all the relationships between your customers and every other domain.
See how we help to reduce costs and improve coverage for financial crime compliance.
See how our platform uses contextual analysis to turn data into a high value asset.
See how our platform uses financial crime technology to enhance your existing IT ecosystem.