Biggest risk to banks revealed: political dangers and evolving crime


Geo-political uncertainty and evolving criminal methodologies like cybercrime are the biggest financial crime risks firms will face in the next 12 months, a new report has revealed. Published by LexisNexis® Risk Solutions, the  information solution provider, the report also highlighted that legacy technology systems are preventing firms from resourcing an effective response to underlying financial crime risks.

As part of the report, LexisNexis Risk Solutions surveyed nearly 200 senior professionals working in retail banks, investment banks and asset management firms and conducted in-depth interviews with senior financial crime professionals working in the UK banking industry. The report found that evolving criminal methodologies are still the biggest perceived future financial crime risk, followed by geo-political events.

When surveyed for the inaugural 2015 edition of the report, 44% of respondents said evolving criminal methodologies were the biggest single emerging financial crime risk – in the 2017 report the same number (44%) of respondents indicated it is the biggest single financial crime risk they currently face. However, this rises to 67% when assessing global investment bankers alone.

>See also: FICO predicts 17 financial crime trends for 2017

The 2017 report identifies geo-political changes as the second biggest future financial crime risk. Financial crime practitioners in retail banks were amongst the most apprehensive with regards to geo-political change, with 37% citing it as the biggest single future financial crime risk.

Additionally, 34% of investment bankers cite geo-political events and sanctions as the biggest financial crime risk facing their organisation. In contrast, only 10% of professionals believed geo-political events were the biggest risk to their organisation in the 2015 report.

Concerning specific geo-political topics, the results were mixed when financial crime professionals were asked how Brexit will impact their ability to fight financial crime. Half (51%) agree it will have both positive and negative impacts on the ability of UK financial institutions to fight financial crime. 30% believe Brexit will have a positive impact, 14% say it will have a negative impact, while the rest remained unsure.

During in-depth interviews with senior financial crime professionals, most participants indicated that changes in sanctions arrangements, following the election of Donald Trump, were also a concern; even more so than Brexit. Sanctions against Iran and Russia were of particular concern.

>See also: Cyber crime and the banking sector

Dean Curtis, UK managing director at LexisNexis Risk Solutions commented on the findings and said that “Imposing sanctions has recently been the US tool of choice when responding to an international threat. Over half of these sanctions have been implemented since 2009 and the Trump administration may potentially continue to utilise sanctions in favour of costly military action. Financial institutions have found managing evolving sanctions policies and the introduction of new targeted sanctions tools – such as the sectoral sanction regime – to be a significant challenge, making them understandably concerned about the need to manage and update risk policies, process and controls.”

Financial institutions noted that effectively responding to underlying risks is a significant challenge. The report found that nearly all financial crime professionals agree that legacy technology is impacting their fight against financial crime.

92% of survey respondents have concerns that their organisation’s legacy technology will become a barrier to fighting financial crime over the next 1-2 years. In addition, 87% of professionals cite disparate technology systems that don’t interoperate or process data properly as a significant challenge, whilst 87% also say their business isn’t able to enhance their technology fast enough to counter evolving criminal methods.

This problem is compounded by evolving regulatory environments, with increased regulations requiring investment in new technologies; 60% of respondents cited this as a root cause of cost increases. In the 2015 edition of Future Financial Crime Risks it was revealed that one global investment bank was spending £1 billion on financial crime compliance alone. The 2017 report reveals that since then, 63% of financial institutions say their compliance costs have increased, whilst just 2% say they have decreased.

>See also: FCA’s business plan flags some key areas of focus for 2017/18

Concluding, Curtis said that “criminal methodologies are constantly evolving and financial institutions are struggling to keep up with their changing tactics when implementing financial crime defences. For those tasked with combatting financial crime it can feel as if they are fighting twenty first century criminals with twentieth century tools. Our report shows financial crime professionals do not believe the industry is doing enough to leverage the advantages of technology to fight financial crime.”

“Whilst the FCA is assisting the acceleration and adoption of technology to fight financial crime through its regulatory Sandbox, more needs to be done. Practitioners must adopt a more strategic view of technology to enhance operational effectiveness as regulation has rapidly evolved in the last 15 years and simply increasing staff numbers is not a sustainable approach. Keeping pace with criminal activity and understanding where technology has advantages over humans, in areas such as machine learning, will determine the future of many industries, none more so than Financial Crime prevention.”


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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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