Compliance headaches and inefficiencies

Regulatory burdens have always been in evidence. However, the landscape has changed greatly in recent years. The banking crisis, Enron et al and increasingly sophisticated, technically savvy and organised fraudsters are all high profile wake-up calls demanding a support network. That comes in the shape of legislation, regulation from professional and overseeing bodies and peer pressure for better practice.

Anti-Money Laundering, KYC, Suitability, FATCA etc mean that brokers, wealth managers and IFAs are exposed to a range of potentially threatening issues. With massive consequences for failure there’s increasing operational effort and expense needed to keep on top. Working practices evolve but, more often than not, they generate increased operational workload. As the burden compounds then you can be sure that the potential penalties for exceptions will also be rising. It’s no surprise that the numbers of compliance-facing staff therefore continue to rise. Against an economic backdrop where efficiency and cost savings are more important than ever this is a recipe for greater overheads with no appreciable return.

This latest Invu white paper examines a selction of issues faced by businesses in the finance sector, in particular the broking and wealth management communities. It’s not exhaustive but it does pick up some of the significant issues faced on a daily basis and some that are on the way. Many of these issues are burdens which IFAs, insurers, mortgage advisors and even accountants in practice face. Whilst setting these out we also identify the role of technology in mitigating them, most notably, of coure, via document based solutions.

Find out what role document solutions can play in mitigating the risks and reducing the day-to-day compliance impact and download the “Wealth Management – the case for eDM” from our resources section at www.invu.net

Coutts AML penalty – how come?

Coutts private bank, a division of the Royal Bank of Scotland, has been fined £8.75m by the Financial Services Authority (FSA) for not displaying adequate measures to prevent money laundering. After reviewing 103 high-risk customer files the FSA found deficiencies in at least 73 of them.

The bank has received the largest fine of its sort for breaching anti money laundering (AML) rules, after three years of ‘systemic’ problems in handling client affairs vulnerable to corruption because of customers’ political links.

The FSA found, after an industry-wide review in October 2010, that the bank was not conducting robust enough checks, nor were they monitoring relationships with high-risk customers to a satisfactory degree or verifying origins of deposits being made. Therefore, any suspicious funds being laundered through the account were not being highlighted.

The failings displayed by Coutts have been labelled as ‘significant, widespread and unacceptable’ with its conduct falling well below the standards expected. The fine which has been awarded to Coutts demonstrates the severity with which the FSA is regarding anti money laundering and should serve as a sharp reminder to other major players in the industry.

But surely avoidance of such fines is simple? Banks should surely have in place a system with which to manage and track any irregular activities which could highlight money laundering or suspicious behaviour around customer accounts. Inherently manual in part, AML relies largely on clients providing physical evidence of identity. Through automating the processes involved in the manual collection of data, a client can be identified and then linked into an online data provider to perform the necessary checks automatically. The processes, infrastructure and technology are all available, so why was this allowed to happen?

Electronic data management not only brings a joined-up process to AML, but also reduces the time taken to perform previously onerous checks. It turns a time consuming task, prone to error, into a background function taking minutes. Our work in the wealth management space proves that compliance can be joined up and effective.

And as if this time and cost saving wasn’t enough, there is then the small matter of avoiding crippling fines for failing to prevent data misuse, and all at the click of a button or two.