5 critical areas to consider
Following are five areas to consider when evaluating which financial crime system to implement.
Compliance
Compliance is a critical aspect of any financial crime program, and the financial crime system an organization implements must meet regulatory compliance requirements for financial crime mitigation, data privacy and security, audit and reporting, ongoing monitoring and screening, and third-party risk management. Validation from independent third parties can help verify the effectiveness and reliability of the system.
Additionally, a financial crime system should be explainable so that users understand and can communicate the reasoning behind the system’s decisions and actions. Systems that lack transparency can make it difficult for stakeholders and regulators to understand how conclusions are drawn. While less transparent systems might offer advanced capabilities, they can pose challenges in terms of compliance and regulatory requirements because transparency is essential for both compliance and building trust in the system’s capabilities.
Organizations should proactively engage in discussions with their regulators, foster a collaborative environment to share ideas, and align on organizational objectives before selecting a new system for their financial crime program. Ongoing, consistent communication can provide organizations with industry feedback and help them successfully navigate choices in the marketplace and adopt new technology.
Capabilities
The capabilities of a financial crime system play a crucial role in a financial crime program’s efficiency and effectiveness. A basic workflow for a financial crime technology vendor should include alert escalation and triage, alert and case assignment, investigation, decision-making and resolution, continuous monitoring, and updates. Organizations also should consider any customization and advanced capabilities offered so that they can tailor the system to their specific needs. Add-ons include automated robots, AI narrative generation, and robust dashboards. An interface that is easy to use and follows a logical workflow supports user adoption and efficiency.
As organizations grow, their financial crime system needs evolve, too. It is essential to evaluate the system’s scalability to confirm that it can accommodate future requirements. Organizations should consider factors such as transaction and account volume, the number of users, geographic coverage, and the volume of data sources. They should also determine whether the system can manage increasing demands without compromising performance. Scalability is particularly important when operating in multiple geographies or dealing with large volumes of transactions.
Technology
When selecting a vendor, organizations should evaluate the underlying technology its financial crime system uses. Is the foundational technology aligned to current technology, or is it aging? Organizations might specifically ask about automation, which plays a pivotal role in streamlining routine tasks such as data entry, transaction monitoring, and report generation, reducing the risk of human error, and enhancing operational efficiency. Additionally, advanced analytics and machine learning algorithms can identify patterns and anomalies to continually improve a system’s effectiveness over time. AI-powered systems potentially can enhance efficiency, accuracy, and the ability to detect and prevent financial crime and fraud.
Organizations should also consider whether a cloud-based system, a software as a service (SaaS), or an on-premises deployment aligns better with their requirements and then inquire about capabilities that allow integration with existing systems and data sources. When choosing between on-premises, SaaS, and private cloud systems, important factors to consider include scalability, customization, cost, data ownership, regulatory compliance, integration capabilities, maintenance and support, security, and business continuity.
Track record
A crucial aspect of evaluating a financial crime system is assessing a vendor’s track record. Financial services organizations should seek a vendor with a solid reputation in the industry and a proven track record of delivering effective systems, which can be assessed by reports of successful implementations and client references. Peers and industry professionals can also provide valuable perspectives to help organizations explore potential challenges and benefits of working with specific vendors.
Organizations should also evaluate a vendor’s customer support services and the level of ongoing support and maintenance it provides beyond the initial implementation. Decision-makers can ask specific questions about the level of customer support service in terms of response time and dedicated call lines to facilitate quick resolution when needed. A reliable vendor understands the importance of offering robust support services that align with service-level agreements. It can commit to promptly addressing any issues or concerns that clients encounter during the use of its systems. It also acknowledges problems and actively works toward resolution to help clients effectively mitigate financial crime risks without interruption.
Evaluating the vendor’s commitment to research and development as well as its ability to stay ahead of emerging threats with the use of advanced technology is also critical when considering a vendor’s track record. By conducting a review of a vendor’s technology and its road map, organizations can select a vendor that meets their immediate needs and provides a system that can evolve amid the ever-changing landscape of financial crime.
Cost
Cost is a significant consideration when evaluating a financial crime system. The total cost of ownership should be assessed, including upfront investment, ongoing maintenance and support, and fees. It is important to consider the initial licensing, infrastructure, and implementation costs as well as the long-term maintenance and support costs. Such costs include annual licensing fees, ongoing expenses, variable costs based on use, resource costs for personnel or consultants, infrastructure costs for hardware and network, and training, customization, and enhancement costs. By carefully considering these costs, organizations can make informed decisions that align with budgets while meeting requirements across the other areas.
While cost is an important factor, it should be balanced with the value the system brings in terms of fraud prevention, anti-money laundering risk mitigation, and operational efficiency. A system that offers a higher upfront cost but delivers substantial benefits in terms of reducing financial losses and improving operational effectiveness might be a more cost-effective choice in the long run.
