Assessing the exposure to risk and techniques to continually identify and manage new risks

Assessing the exposure to risk and techniques to continually identify and manage new risks

By Kevin Lindsay, Deputy Head of Financial Crime Group, Sumitomo Mitsui Banking Corporation Europe Limited.

Kevin, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is

I have been in the Banking industry for 31 years, with the majority of my time spent with Lloyds Banking Group.  My career has covered all areas of Banking including Retail, Corporate, Business Banking and an overseas secondment to New York as part of the Lloyds Bank Project Finance Team. My last 9 years have been spent in Risk Management, primarily dealing with Financial Crime Risk.  Firstly in Lloyds Bank and then in October 2014 I took up my current position with SMBCE. My current role focuses on AML/CTF, Sanctions, Anti Bribery, Fraud and Tax Evasion.

You will be reviewing the exposure to risk and techniques to continually identify and manage new risks at the upcoming Fraud and Financial Crime Summit. Why do you feel this is an important talking point?

Whether you are in Retail, Investment, Private or Commercial Banking Fraud and Financial Crime are one of the most significant challenges we face of a daily basis.  The cost of Fraud and the potential fines associated to failings in AML/CTF procedures can be significant.  We are seeing new fraud reporting being introduced under PSD2, new technologies and new products such as Bitcoin etc.

When considering the interplay of the first and second line, what are the essential considerations that need to be made?

The key consideration and as such the challenge we face is the knowledge and understanding sits within the second line.  The first line, are tasked in general, with delivering results.  The second line must impart knowledge and understanding into the first line to ensure that when they identify the risks associated to a customer or product they can, document and mitigate the underlying financial crime risks as well as accept the risk.

How can financial institutions best understand where risks lie in a dynamic environment? And have you got any examples?

Via the use of risk assessments, such as:

  • Risk Assessments are live documents and cannot just be reviewed on an annual basis.
  • Understanding our customers and how they will interact with us on a day to day basis.
  • Understanding our product offering and how each product may be used in a criminal/ fraudulent manner.
  • Have strong controls around transaction monitoring.
What are some of the challenges of ensuring risk assessments reflect risks?

It is relatively simple to write a fraud policy.  Where is become more difficult, is taking that policy and embedding the requirements into the underlying procedures and controls.  This is made even more difficult by the evolving nature of fraud, where the risks we face are continually changing and our underlying controls also need to be updated to protect both our Financial Institutions and customers alike. There is also a need prioritize remediation of any gaps identified in the control environment.

Finally, what challenges do you foresee within the Fraud and Financial Crime landscape over the coming years?

This is a continually evolving landscape the challenge we face is keeping up to date with the methods fraudsters and criminals have developed.  I see Cyber Crime, product developments in areas such as Bitcoin and the underlying technologies that support these platforms as areas of focus over the coming years.  Secondly, regulation being placed upon Financial Institutions takes a significant amount of time, money and effort to embed into our day to day activities.