Due to the operating pace of challenger banks, having robust and regularly reviewed governance and management information is integral in the fight against financial crime and fraud.
This includes strengthening governance and oversight for the pre-application process of onboarding customers – an area Starling was criticised for – and utilising due diligence tools and technology to allow them to do this at pace, without hindering the onboarding processes.
Banks should also have an enhanced due diligence process for those deemed high risk, and the evaluation of risk should be continually monitored and reviewed as new threat insights are captured.
As challenger banks scale up, it is important to continue to review the processes, the controls and the checks for customers in place.
Control requirements will change and need to be varied according to threat insights.
Financial crime management is a continuum
For banks to effectively demonstrate compliance, they must see the process as a continuum, not a once-and-done approach to customer verification at onboarding.
Financial control management, when done effectively, requires a systemic approach, joining up risk, intelligence, control evaluation and customer monitoring to have the maximum impact and ensure compliance with the financial regulations.
It is also integral that the staff operating in banks have regular financial crime and fraud awareness training. This is important to ensure they can help prevent harm by spotting fraud, but also so that the quality of information they pass to the wider community is of good quality and accurate.
This is significant when considering the role of suspicious activity reporting that banks are responsible for providing to law enforcement, such as the National Crime Agency.
Fraud awareness and capability building can ensure suspicious activity reports are informative and give the NCA the best opportunity to disrupt and reduce harm, which is the collective aim and a responsibility that all challenger banks share.
The future of tackling fraud
It is clear that fraud remains a threat to society, particularly for those most vulnerable. The regulatory changes will, it is hoped, improve the outcomes for those who do suffer losses with both challenger and traditional banks.
Across sectors, financial crime leaders and organisations need to continue to bring technological advances and AI to help prevent harm as much as possible and utilise the new risk tooling and intelligence sharing being implemented across banks that has the potential to revolutionise the sector.
Laura Eshelby is head of economic crime at Clue Software
