European authorities are taking steps to crack down on illicit activities happening throughout financial institutions. Earlier this week, Dutch authorities fined ING Group 775 million euros which equate to about $900 million after investigations over money laundering activities. The investigation stemmed from the lack of ING’s reporting or failure to report suspicious activity at all. Staff members made no reports and took no actions when customers used services that were part of possible money laundering schemes. The fault stems from “collective shortcomings at all responsible management levels,” said the prosecution.
Money laundering and financial crimes are no new game. So, why are these suspicious transactions still slipping through the cracks? Messy, overwhelming, and inaccurate data is the answer. It’s estimated that over 90 percent of financial institution watch list alerts are false positives which take an immense amount of time and energy to sift through. In discovery sessions held by Pitney Bowes, it was found that data quality is the most troubling issue for financial institutions. AI technology and entity resolution solutions can help financial institutions dissect the bulk data they have to reveal true risks.
“What we found that was by reducing the noise up front in the process, pre TMS and prior to an event ever becoming an alert requiring investigation, financial institutions could have a dramatic impact while improving the accuracy of the matches between the party and portfolio,” explained Jim Burnick, Financial Services Managing Director at Pitney Bowes.
According to a recent IDC study, financial institutions who utilize entity resolution solutions are more likely to be Financial Crime Compliance (FCC), avoiding fiascos like the ING fine. With this software, firms are achieving $1.24 million per year higher in FCC staff productivity per one million accounts by proving compliance with regulations such as anti-money laundering (AML) and know-your-customer (KYC).
“We’ve been penalized for not having the right controls around those regulations so we know firsthand how much it may cost and just how painful that may be. The bank takes seriously the possibility that it may lose its license that it may not be able to operate, so the significance is critical in how it treats this. We don’t put money on it but the actual survival of the bank on it,” said one of the study participants.
With financial crimes continuing to grow, now is the time for financial institutions to implement technology that will increase compliance and keep them out of the headlines. Entity resolution software can identify relationships, patterns, and oddities throughout accounts to alert institutions of possible illicit behavior.
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