Financial institutions will need to redefine their risk-based strategies in 2023
As we tally up the risks and challenges that ruled this transitional year, we saw that 2022 experienced difficulties throughout the global economy, endured a heated political climate, and faced an ever-expanding list of new financial crime typologies worldwide.
In 2023, FIs will look to strengthen their approach to fighting financial crime
Looking ahead to 2023, financial services organisations will emphasise and redefine an enhanced risk-based approach to fighting financial crime as they look for more robust methods to overcome these complex and intertwined challenges while being pressured to reduce costs in the face of an uncertain economy.
By identifying unique insights and creating a single point of truth, financial institutions will focus their efforts on identifying anomalies and isolating financial crime that crosses over between anti-money laundering (AML) and fraud. In addition, organisations will integrate advanced solutions and emerging technologies that measure risk, reduce cost, and support cross-FI initiatives.
This effort requires financial institutions to transform how risk is scored and monitored. As an attribute of that approach, financial institutions will further break down internal silos and find new ways to share valuable information across their organisations and potentially with other FIs. Looking to provide business intelligence around customers and entities, financial institutions will aim to connect the dots across their businesses to enhance end-to-end enterprise fraud solutions’ effectiveness and enrich entity-centric AML capabilities with a single risk score.
Of course, this focus will impact specific regulatory areas within financial institutions. Within specific categories, we have seen strong interest in watchlist screening and communications monitoring solutions throughout 2022 which will continue through 2023. Authorised fraud/scams will continue to take centre stage throughout 2023, especially given the possibility of liability shifting to financial institutions. And not surprisingly, the crypto winter will continue throughout 2023 with further fallout as firms struggle with transparency and regulatory compliance concerns.
Cloud adoption continues to accelerate
The movement to digital will also be driven by accelerated adoption of the cloud, combined with further innovation in data management. We expect the coming year to see next-level evolution in digital management processes. And from that, we hope to see more significant improvements in the customer experience, including account onboarding and the addition of new products and services.
In 2023, the term “future-proofing” takes on significant importance as financial crime and compliance programmes contend with the challenges associated with ever-evolving regulatory changes, growing criminal behavior, and sanctions. Future-proofing is especially necessary when you include digital acceleration, the recession, and the resulting cost pressures.
Digital transformation will be refined further in the coming year as financial institutions transition to offering more robust online and digital services to meet the needs of demanding consumers. These initiatives will impact customer retention and reflect how customers will interact with banks now and in the future. 2023 will also see banks moving from a “product-centric” mindset to one that is more “customer-centric”. And tackling the identity challenge of our digital world will be of paramount significance.
Looking ahead
Financial institutions will create an approach that integrates digital systems, customer experience platforms, applications, and infrastructure for a more cohesive and personal digital customer journey, while also reducing risk. With increasing costs, FIs will find new ways to apply next-generation technologies to their often legacy-burdened processes to mitigate regulatory risk while speeding up operational efficiency.
Unfortunately, we predict that increased sanctions, along with an increased number of fines, will remain a leading issue for financial institutions. Amid any new challenges that may emerge, financial institutions will further examine ways to streamline their organisations to free up time for their analysts to focus on the actual work necessary to fight financial crime and ultimately to create a better customer experience.
