Home Banking Meeting the Growing Challenge of Financial-Crime Compliance

Meeting the Growing Challenge of Financial-Crime Compliance

by internationalbanker

By Tony Wicks, Head of Financial Crime Compliance, SWIFT





Driven by expectations from customers used to making and receiving instant payments within their home countries, the speed and transparency of cross-border payments are catching up fast. These days, nearly half of cross-border payments arrive in under 30 minutes, as innovation and collaboration across financial institutions continue to drive progress.

Dealing with 180 different currencies and even more regulatory jurisdictions, the financial-services community has to navigate a thicket of complexities and the operational complications that come with it. As payments move faster, compliance must also adapt to keep ahead of fraudsters and money-launderers. Speed and safety must evolve in parallel to maintain the integrity and security of the payments system.

Advancing technology

Ensuring the correspondent-banking industry continues to have the tightest controls and most efficient tools to detect and prevent illegal use of the financial system remains a top priority. As we move towards compliance in a real-time world, concerns such as anti-money laundering (AML), know your customer (KYC) and sanctions will become even more challenging. More than ever before, compliance teams need to make difficult decisions within a shorter timeframe, and it is important to remove as much human error from the equation as possible.

The increasing volume of alerts, along with the complexity and workloads that compliance teams face, can create problems keeping up, leading to delays, lost business and sometimes even costly regulatory penalties. The good news is we have already made huge strides. Services, technologies and initiatives such as the SWIFT gpi standard, APIs (application programming interfaces) and ISO 20022 (International Organization for Standardization’s [ISO’s] Standard 20022) are already transforming the industry. And more is to come.

For example, with the gpi standard, banks sending data over the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network can pre-validate the beneficiary account information with the ultimate receiving bank, thus minimising further the risk of payments ending up in the wrong account.

SWIFT Payment Controls—a tool to prevent and detect fraud—helps banks monitor and protect their core payments by flagging and/or blocking fast-moving, suspect transactions efficiently in real-time. The tool enables customers to screen their sent payment instructions safely, in-network, to detect illicit or unusual message flows.

Implementing our cloud-hosted screening and fraud solutions reduces IT (information technology) costs, accelerates deployment and reduces reliance on time-consuming, inefficient and potentially risky manual processes while also lowering overall costs and achieving world-class security. Our solutions allow financial institutions to standardise compliance processes without installing expensive hardware or software and enable them to use global SWIFT data to gain unique insights and better-targeted compliance activities.

Thanks to our unique position at the heart of the financial industry, we play a vital role in identifying and evaluating the viability, practicality and potential of emerging technologies to deliver value to our community. We continue to invest in pilots and proof-of-value initiatives, working with players from across the ecosystem—fintechs (financial-technology firms), corporates, established financial institutions, central banks and market infrastructures—to explore the future of payments.

Take KYC, for instance. KYC continues to be one of the biggest challenges in the compliance space, both for financial institutions and corporates. Established in 2014, SWIFT’s KYC Registry simplifies the process by providing access to a secure platform for banks to share KYC data for thousands of institutions. In 2019, we extended these benefits to SWIFT’s community of corporate groups, which now benefit from the ability to structure their KYC data in accordance with a standardised baseline, agreed by banks and corporates across the globe.

The importance of data

Unlocking the power of real-time payments depends on banks having clean, complete and correctly formatted data. Many in the industry still experience compliance challenges with data, but change is on the way as the industry moves to adopt ISO 20022—the standard for electronic-data interchange between financial institutions—as its common language.

For international banks, adopting this messaging standard will help them to meet the increasingly tight compliance obligations on international payments. Today, banks sometimes receive ambiguous, unstructured strings of data to identify the originator and the beneficiary of a payment. When a bank receives a payment in its local jurisdiction, it has the burden of parsing that information, making sense of it and trying to match it against sanctions and AML lists. ISO 20022 will introduce structure to those strings of data, greatly improving compliance efficiency.

With ISO 20022, not only will banks be able to transmit more data, but they will also be able to examine it in much more detail due to the granularity of the data. This means that they will be able to more accurately and more easily comply with regulatory and risk-related requirements. Which, in turn, means that the number of failed payments, false positives and associated investigations will be significantly reduced.

It will also allow them to revamp their legacy systems towards a future-proofed data model and standard, enabling them to offer a better service quality to their clients with agility and speed.

What’s next?

Sending payments across borders takes high levels of collaboration, communication, community and trust. Making that experience as straightforward, simple, quick and secure as possible is the spirit with which SWIFT was started, and it remains our mission to this day—more than 40 years later.

As we look ahead, we are taking another leap forward. In September 2020, the SWIFT Board, representing our entire 11,000-strong community of institutions, approved a new strategy that will see SWIFT enable seamless, frictionless and instant transactions from one account to another, anywhere in the world.

We will do this by transforming the SWIFT platform based on the concept of transaction management. Retaining SWIFT messaging, the platform goes way beyond today’s capabilities to orchestrate fast and frictionless end-to-end transactions while maintaining SWIFT’s hallmark focus on resiliency and security. SWIFT’s platform will help remove compliance delays by maintaining full transaction data at the centre and ensure end-to-end transaction integrity.

The platform will provide a set of common transaction-processing services, such as pre-validation of essential data, fraud detection, data analytics, transaction tracking and exception-case management. And we will continue to work with our community to further offer compliance support, leverage rich data and improve end-to-end efficiency. Furthermore, improved data quality, along with advanced analytics and insights, will pave the way for financial institutions to offer new value-added services and enhance the end-customer experience.

We will introduce the platform in a way that helps the fastest movers progress quickly but doesn’t leave anyone behind, so interoperability between existing and future infrastructure is critical. The new platform will handle the translations between different formats during the transition, alleviating any pain banks feel and enabling them to realise the benefits of ISO 20022 faster.

SWIFT is driving the creation of community-wide solutions to deliver on the vision of fast, secure and compliant payments. As a strategic partner, SWIFT will deliver on the fundamental, underlying infrastructure to help financial institutions adapt, thrive and grow in a competitive world. This future is within reach. The elements are already in place; the technology is available; and, together, we are paving the way to instant and frictionless payments processing.


Tony Wicks is Head of Financial Crime Compliance at SWIFT. For more than 20 years, Tony has worked with leading financial institutions to build technology solutions for regulation, compliance and fraud detection and has done more than his fair share of data analytics on the way.


Related Articles

Leave a Comment

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.