5 minute read 8 Mar 2019
Business-persons meeting over interactive touch table

Why collaboration is the best way to combat financial crime

By Dai Bedford

EY Global Banking & Capital Markets Consulting Leader

Transformation leader. Talent developer. Family man. Welsh rugby fan.

5 minute read 8 Mar 2019

As the costs and complexity of tackling financial crime increase, more banks are considering a managed services approach.

One billion dollars.

That’s how much each of the world’s largest banks spend each year on their financial crime operations. Much of this spend is allocated just to compliance costs, rather than proactively targeting the criminal behavior, which is becoming more sophisticated as technology advances.

Since the introduction of the US’s Patriot Act in 2001, the regulatory onus on banks to know exactly who their customers are and where their money is coming from has increased, with regulators fining the world’s biggest banks more than US$320b for breaches since 2008.

Crime cost

US$1.4 - 3.5tr

is the estimated annual cost of money laundering and associated crimes.

Source: ey.com

As banks spend more on preventing financial crime, they also face new and competing priorities for their budget and resources. In our digital world, customers demand better, technology-led experiences, while growing sector convergence ushers in new non-traditional competitors that threaten banks’ market share.

If financial institutions are to compete with the world’s tech giants, can they afford to continue to focus their technology initiatives, best talent and investment on compliance? More banks realize it’s time for a new approach.

Seeking a smarter, tech-enabled financial crime strategy

As COOs expend more effort and resources tackling financial crime without making significant progress, more are recognizing the need for an increasingly strategic approach. But building the capabilities, systems and tools to go beyond compliance to proactively target criminal activity is not easy and most financial institutions struggle to free up the necessary capabilities, technology and staff.

No wonder that so many banks are seeking a more collaborative approach through managed services models – outsourcing specific elements of financial crime compliance or the entire function to third-party provider.  

Fines and misconduct


in fines have been issued to the world’s biggest banks for regulatory misconduct since 2008.

Source: ey.com

When delivered by a provider with the right mix of experience, expertise and technology, managed services providers offer benefits rarely matched by in-house teams.

  • Technology that reduces costs and enhances performance: Perhaps the biggest benefit of managed services is the ability to give banks access to the new technologies that are transforming core financial crime processes including:

    Anti-money laundering (AML): Traditional AML transaction monitoring controls have been costly and inefficient, typically generating high levels of false positive alerts and a significant workload for staff. Deploying artificial intelligence (AI) can immediately cut the costs of AML, while improving outcomes, by using machine learning to monitor transactions and applying natural language processing and text mining techniques to customer due diligence and screening. 

    Know-your-customer (KYC): Early KYC processes involved the costly creation of siloed, data repositories which were typically managed and owned by vendors. This approach yielded limited value. Now, data-sharing technologies are allowing the development of KYC platforms, such as EY’s Digital Passport, that allow customer-permissioned, secure exchange of digital identity and customer information among collaborating stakeholders.

Technologies, such EY’s Cognitive Investigator, when deployed in tandem with specialist expertise can deliver efficiency savings of up to 40%, and increase the effectiveness of the financial crime function, at a time when banks are under pressure to move beyond red-flagging suspicious activity to target and prevent crime. Critically, when banks leverage the technology of a managed services provider, they free up their own resources to focus on creating the strategic opportunities that will add value and grow revenue. 

  • Talent with deep industry and technology knowledge: The most sophisticated technology works best in combination with human insights. But even the world’s leading banks are struggling to win the war for top specialist talent in a tight market. The difficulty around finding and retaining people with the rare combination of technology capabilities and deep industry knowledge is another reason for banks to consider a managed services approach in fighting financial crime. The right providers provide access to specialist talent and strategic counsel when and where it’s needed. 

  • Trusted relationships with regulatory authorities: The potential of innovative technology to tackle financial crime is only unlocked when deployed in an approved and regulatory credible way. For example, machine learning offers huge potential to transform screening, but unless an algorithm is repeatable and explainable, it will not gain regulatory approval. Working with a managed services provider that has trusted relationships with the world’s regulators helps technology be deployed in a manner that can meet regulatory approval.

Suspicious activity reporting


is the expected increase in suspicious activity reporting for 2017 (most recent figures available) across major financial centers.

Evolving regulatory perspectives around new technology

As banks begin to incorporate machine learning, AI and other technologies into their financial crime operations, are regulators ready? And how can they adopt these technologies themselves? We recently hosted a Financial Conduct Authority (FCA) workshop in London that brought together 20 global regulators to discuss how to move forward with new technologies, particularly exploring how to define their own use of these tools and facilitate their safe adoption within industry.

Disrupting financial crime needs a new approach

Financial crime is not a new issue, but the increasing sophistication of criminals, the rise of new technologies and growing regulatory scrutiny means that disrupting this crime is becoming more difficult and costly. Banks must reassess their current approach and check that it is fit for purpose.
Is building the capabilities and technology in-house the best strategy, when the business faces other challenges in a rapidly changing market? Working with a managed services provider can be a smarter option, providing greater cost efficiencies, increased effectiveness, and stronger regulatory credibility, while freeing up the business to focus on growth and competitive priorities.



Financial institutions that adopt a managed services approach to financial crime can significantly improve the efficiency and effectiveness of the function, and free up resources to focus on strategic opportunities.

About this article

By Dai Bedford

EY Global Banking & Capital Markets Consulting Leader

Transformation leader. Talent developer. Family man. Welsh rugby fan.