How Data-driven Suptech Can Change The Game In Fighting Financial Crime –

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We’re just halfway through 2022 and we have already witnessed a number of innovative new initiatives in the banking supervisory innovation landscape.

NewSuptech initiatives are gaining popularity in the financial services sector

In January2022, The European Banking Authority (EBA) announced the launch of EuReCA – the EU’s central database for anti-Money laundering (AML), and counter financing of terror (CFT). TheIntention is to provide the EBA as well as the Competent Authorities (CAs) of all EU nations holistic information to monitor financial institutions (FIs), assess risks and potential impacts, and identify early warnings of emerging AML-CFT is a risk in the region.

HotIn the wake of this launch, March 2022 Singapore’s regulator the MAS (Monetary AuthorityThis is Singapore) and BIS Innovation HubAnnouncement Project Ellipse – a prototype supervisory analytics platform that can integrate regulatory, news, and media data to discover potential risks to FIs and the financial system in that jurisdiction.

RegulatorsWe have always been concerned with monitoring risks and steering FIs under their supervision towards stronger defenses. ButThe emphasis now shifts heavily to combining traditional and alternative data with advanced technology for forward-looking analytical insight-Based supervision

TheData era-driven, next-Gen suptech is here!

SuptechData and its importance-Fincrime prevention strategies that work

FinancialCriminals are moving at an unprecedented speed in terms of the sophistication and complexity of their activities, thanks to cutting-Edge technologies RegulatorsIn addition to tightened regulations, institutions are also looking at how disruptive technologies can be used to enhance their defenses against these crimes. WhileFinancial institutions are the first line for such defense, handling the flow of money directly. Reports they file with regulators enable further investigation and may trigger enforcement action against criminals.

RegulatorySupervision is a daunting task as all reporting entities within the jurisdiction file suspicious Activity Reports (SARs), with their supervisors/CAs. ThisThis means that multiple institutions receive tons of data on suspicious transactions, individuals, or entities. These data must then be investigated by the supervisory bodies.

The UK’s FIU, for example, receives over 570,000 SARs a year, while the US’ FinCEN received over 2.3 million SARs in 2019 alone. InIn addition, these authorities conduct audits and inspections of FIs to evaluate compliance with regulatory compliance rules, as well as the effectiveness and efficiency of their systems and procedures to detect and prevent financial crimes. AuthoritiesIn order to address identified gaps and risks, FIs will be required to take remedial steps. ManuallyThis information can be used to connect FI SARs with audit findings, their progress on remedial action, and to analyze insights about multiple FIs in a region to identify emerging fincrime risks.

SuptechProvides innovative technology tools to regulatory agencies to improve efficiency through automation and digitisation data. JustRegtech helps FIs strengthen their regulatory compliance functions. Supptech enables regulatory authorities monitor risk and compliance at more effective FIs. ButTechnology is only effective if it is powered and supported by strong data. In the context of regulatory supervision, what is important is timely, complete, accurate (continuously up-to-date), and quality data about the FIs being supervised.

CompositeTo propel AI, regulator data-Intelligent suptech solutions that are based on intelligence

EuReCA (EuropeanReporting system for material CFT-AML weaknesses (central reporting platform) where CAsAll EU countries will submit reports identifying material weaknesses in FIs that they supervise, the corrective measures they took, and regular updates on each FI’s progress in responding to these steps. TheEBA will analyze the combined information to identify and warn of emerging threats. TheInformation will also be shared by CAsThe EBA is available to assist supervisory efforts both proactively as well as on request.

EuReCA is expected to store a lot of data. This data can be analysed using the appropriate tools and methodologies to uncover deep insights about FI behaviour and risk profiles.-CFT gaps DigitalReporting solutions for automated, structured and quality data submissions, and predictive analytics tools to generate FI and region-specific fincrime risks can reduce manual effort and improve EuReCA’s supervisory effectiveness. If this information is further combined with FIs’ SAR reports submitted to CAsMachine learning solutions are a great way to help CAs identify risky entities and transaction patterns of multiple FIs in a region, while network graph technology can enable the discovery of threat actors and linked entities using the region’s financial system.

Project EllipseAdvanced analytics, machine learning, natural language processing are used to analyze a combination of regulatory reports, news and media information in order to identify emerging risks and provide insights that can be used to make intelligent supervisory decisions. InitiativesSuch pioneers are leaders in innovative data.-driven solutions that make regulatory supervision more efficient and effective. AsData are also adopted by other regulators.-powered digital suptech innovation will witness a sharp rise, which will in turn boost the industry’s fight against financial crime.

TheWay forward for data-driven suptech

FightingFinancial crime is a collaborative effort between institutions, regulators, law enforcement, technology partners and all other parties involved in this chain. AndAs the old saying goes, a chain can only be as strong as its weakest link. EveryEach player in the chain must have strong defense mechanisms to detect and prevent crimes. RegulatorsWe encourage data sharing and the use advanced technology by all industry players.

While a lot is generally discussed about regtechs powering FIs’ defense frameworks, suptechs are now gaining prominence with pioneers like the EBA and MAS breaking new ground in this space. TheEuReCA success stories EllipseThis will encourage further innovation in suptech, and their adoption worldwide by supervisors. AnAn exciting new adventure has just begun.


AboutThe author

Sujata Dasgupta is global head – financial crime compliance advisory at Tata Consultancy Services, based at Stockholm, Sweden.

SheWith over 20 years experience, has worked extensively in the areas KYC, sanctions, fraud, AML and fraud across banking and IT services.

SheIt has worked with several premier banks in major financial hubs in seven different countries in the US, UK, EU and other parts of the world. Asia.

SheYou can contact us on LinkedIn.

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