Using Technology to Combat Financial Crime in Retail Banking (Strategic Focus)

The increasing amount of overlap and duplication of data, tasks and processes in their anti-fraud and anti-money laundering divisions is driving banks to seek synergies between compliance, risk management and security

Report Highlights
The ongoing development of the digital economy brings with it unwanted side effects. The lack of counter-measures to unintended uses of new payment methods, customer data theft and a growing cyber-crime community is resulting in an increased number of financial crime events

In order to enhance their marketing messages, vendors should focus on addressing the most important customer paint points. For many banks, the top priorities when investing in anti-financial crime solutions are effective monitoring and detection capabilities, as well as strong workflow capabilities to support effective investigations
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3
Table of figures 4
Table of tables 4
Market Opportunity 5
Introduction 5
Banks need to exploit the synergies between anti-fraud and anti-money laundering 6
Banks needs to address three major areas to combat financial crime 6
Banks need to comply with the growing amount of regulatory requirements 7
Banks need to focus on balancing rules- and risk-based approaches 9
The increasing burden of operational risk management 10
Banks are moving from a reactive to an intelligence-based, proactive approach 10
Evolution of the Anti-Financial Crime Discipline 12
The evolving digital economy creates new money laundering and fraud threats 12
Unregulated 'virtual world' transactions are an emerging challenge to combating financial crime 12
Customer data theft is an increasingly painful issue, due to the potential implications of ID theft 13
New windows of opportunity are opening for fraudsters during the current financial turmoil 14
Central and Eastern Europe and Central Africa have become epicenters of cyber-crime 15
Banks need to focus on automation to reduce error and increase deviation detection levels 15
Banks need to improve the accuracy of identifying financial crime events 16
Real time detection is an increasingly urgent requirement 17
Banks need to focus on data management to improve their ability to detect anomalies 17
Banks need to understand customer data to successfully implement their compliance and risk strategies 18
Growing costs are driving increased standardization of business processes 18
Banks need to balance accountability for risk and low-cost sourcing alternatives 19
Technology and Vendor Landscape 20
The sophistication of back and middle office technology is growing 21
Front office monitoring solutions have proliferated in response to demand 24
The market is still fragmented due to its immaturity 26
User-friendly AML and anti-fraud management tools increase workflow efficiency 27
Real-time detection capability enhances successful prevention 28
An increasingly cost-driven market drives adoption of a hosted delivery model 29
Go to Market 31
Vendors should align the positioning of their solutions with their clients' main hot-spots 31
Banks are seeking end-to-end solutions across financial crime types and investigation chains 32
MISs are forecast as one of the fastest growing areas of technology expenditure 32
APPENDIX 34
Definitions 34
Methodology 35
Further reading 35
Ask the analyst 36
Datamonitor consulting 36
Disclaimer 36
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Table 1: Regulatory drivers - major implications 8
Table 2: Major industry associations or government agencies 9
Table 3: New payment methods - money laundering and terrorist financing risks 13
Figure 1: Which three financial crimes do you consider the highest priority to address? 5
Figure 2: Rules-based approach vs. risk-based approach 7
Figure 3: Evolution of financial crime detection and prevention management 11
Figure 4: Which areas of regulatory compliance will be driving IT project spending in 2009? 16
Figure 5: Worldwide monitoring and management of risk and compliance key figures 19
Figure 6: Overall AML and anti-fraud technology architecture 20
Figure 7: Analysis of payment flows 22
Figure 8: The anti-financial crime vendor offering landscape 27
Figure 9: Graphical user interface - example of a fraud analyst dashboard 28
Figure 10: Please rate the importance of the following objectives to your IT investment strategy in 2009 30
Figure 11: What are your organization's top three priorities when investing in anti-money laundering (AML) and anti-fraud solutions? (Rank top three in order of priority) 31
Figure 12: Retail banking technology spending by business function globally 33
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