Banks face gaps in fraud and money laundering defenses

Banks are struggling to build a joined-up view of financial crime as separate fraud and anti-money laundering (AML) operations leave gaps in customer-risk monitoring, according to research from Datos Insights and SAS.

86% of financial institutions, from 165 fraud and AML executives surveyed across 21 countries, were missing connections between fraud activity and money laundering. A further 87% said they had yet to establish a complete view of customer risk.

The findings point to a significant challenge for banks investing in financial crime technology; that merely integrating detection systems does not necessarily mean that teams, policies and investigations are aligned effectively.

While 71% of respondents said their institutions were integrating fraud and AML detection and monitoring technology, only 13% were aligning those functions with governance, policies and organisational structures.

Organisational silos were identified as the biggest barrier, cited by 88% of respondents. Technology limitations were a concern for 73%, while 70% pointed to problems with data governance and quality.

Serpil Hall, strategic advisor for fraud and AML at Datos Insights, said that while technology can help fraud and AML teams to improve making risk connections, that alone is not enough.

"The institutions making progress are also connecting data, case management, investigations and information sharing so they can see more of the risk in broader context and act sooner," she noted.

The report recommends that banks connect their existing fraud and financial crime compliance systems, improve data sharing and coordinate investigations, rather than replacing their entire technology infrastructure.