Passcon’s top 10 tips about how to turn your TM Organization into a production environment and prepare it for the future

The press is currently full of news about Transaction Monitoring related to high fines from regulators. From our experience, many banks have created interim solutions instead of focusing on sustainable TM organizations. These interim solutions have shown the following negative side effects:

(1) They are very costly due to ad hoc solutions and subsequent adjustments (2) They are not 100% suitable and do not fully meet the organizational needs (3) Since the interim solutions are often not perfectly suitable, high fines still occur and damage the bank’s image

Our Recommendation: Focus on building a suitable, long-lasting TM as it is of the same importance for banks as focusing on a sustainable KYC organization. These two parts are strongly interconnected and together avoid high fines and reputation losses.

Many (financial) Institutions are currently facing the decision of whether to in-or outsource their KYC process.

The reason for that is, that their KYC departments often show a lack of trained staff and at the same time cause higher costs due to many freelancer deployments.

Although time is limited and regulatory requirements are increasing only, for many of them, outsourcing is not an option as they want their KYC department to stay within the company.

Hence, the institutions have no time for hiring, training and establishment of suitable KYC teams the situation remains unchanged.

THE SOLUTION

passcon’s BOT (build, operate, transfer) Model.

With our KYC Factory, we perform the production process on-site within the client’s premises and offsite in our shared service centre. This KYC production planning process normally counts 12 steps…

In times where regulations are constantly changing and cost focus is all around, KYC is for many banks of pivotal importance and extremely challenging!

Inadequate controls of money flows and resulting high fines from local regulatory authorities force financial institutions to act.

Banks across the globe spend huge amounts for optimization of their current KYC process and many software firms promise a digital and automated KYC process.

But how does it look like on a day to day basis? We know it from our daily work in passcon’s KYC Factory.

In recent years, the number of publications where financial institutions have become a victim of or been involved in financial crimes, especially in money laundering, has increased dramatically. For instance, as recently as January 2017, newspapers around the world announced that Deutsche Bank was involved in a major financial crime, resulting in a fine of more than 630 million dollars…​

Increasing regulatory requirements, cost-cutting measures, digitization and ongoing optimization – the complex and parallel challenges banks are facing today can rarely be solved efficiently in traditional line organizations. Instead, project work is becoming increasingly important. In a multidimensional project landscape of an organization, however, individual projects can no longer be viewed separated from each other.

The compliance function and independent internal audit function have become integral parts of financial institutions. As key functions of the three-lines of defence model, both functions address internal and external risks in order to continuously improve financial institutions, operational and organizational models, systems and processes and internal guidelines and standards. Understanding, identifying, analyzing and evaluating relevant risks related to AML/KYC is essential for a complex and global financial institution to ensure future growth and success.