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Financial crime affects us all – oldFS, newFS, citizens. How can businesses control and minimise Financial Crime?

Marria.jpg">Marria-150x150.jpg" alt="" width="150" height="150">We are joined today by Vishal Marria whose data-driven firm Quantexa has grown super-rapidly and works in this area as well as on other big data issues. Their clients include HSBC and Shell and despite being founded only two and a half years ago, already have offices in London, Brussels, Sydney, Boston, New York, Toronto and Singapore

Financial Crime is obviously an issue that affects Fintechs as well as FS – indeed I have been hearing about fraud since the earliest podcasts but naturally no-one wanted to talk about it (a) to avoid introducing worries in customers minds and (b) to avoid talking about where the castle walls are thick and where they are thin.

Topics discussed on the show include:

• running an empire and why planes are still important despite Skype et al
• scaling organisations
• 110 employees and 7 offices in 2.5yrs… wow!
• the secrets behind their stellar growth
• their business focus in terms of contextual information
• the importance of contextual information in terms of financial crime
• their product focus
• what is Financial Crime?
• elements of FinCrime include:
  • money laundering
  • fraud
  • sanctions
  • anti-bribery and corruption
• elements can combine to make a FinCrime
• terrorism, human trafficking all involve the movement of money
• needles in haystacks hence “Big Data” importance
• how to know the good guys/bad guys
• the challenge of acquisitions of banks and different systems holding slightly different information
• onboarding clients – the importance of external information
• how can banks spot “terrorist activity” if even the secret services miss more than a few?
• the grey area between fraud and bad debt – first party fraud, sleeper fraud
• how these take place
• fictitious and stolen IDs – bust-out fraud
• these are big problems in the UK
• “2% of transactions could be some form of fraud”
• “it’s on the up”
• one institution said anywhere between 10% and 20% of their credit losses could be bust-out or sleeper fraud – not the can’t-pay but the won’t-pay
• Danske Bank CEO going as a result of Financial Crime issues
• mirror-trading – hit Deutsche Bank a few years ago
• penalties for getting things wrong eg HSBC
  • huge fine
  • DPA – Deferred Prosecution Agreement – where you have to take in a monitor in your bank
  • not being able to clear US$
  • reputational damage – costs a lot/long time to fix
• BCCI
• the political angle to Standard Chartered’s problems with the US – sanctions as economic/political warfare
• conflicting regulations on FinCrime from different regimes for global banks – what to do with conflicts
• global banks as collections of local banks
• clearing US$ as a way of extending extraterritoriality
• the importance of the wider ecosystem around the IT system
• combining human intelligence and IT
• the trade-off of infinite cost to do infinite monitoring versus a more probabilistic approach
• different regulatory angles on this trade-off and realpolitik
• model validation and governance
• more controls, more collaboration with regulators, more sharing of information
• “the squashed balloon effect”
• Quantexa’s role in contextual monitoring

And much much more

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