THE FUTURE OF ENTITY DUE DILIGENCE

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THE FUTURE OF ENTITY DUE DILIGENCE

The world has gone through an incredible amount of technological transformation over the past ten years.  While it may seem hard to imagine that change will continue at this pace, it’s not only likely to continue, but it will accelerate. There are various functional areas within institutions that support global commerce, but some have been laggards in adopting new technology for a plethora of reasons.

Structural market trends will force organizations to innovate or they will be subject to consolidation, reduction of market share, and, in some circumstances, complete liquidation.  Future proofing the entity due diligence process is one key functional area that should be part of an organization's overall innovation road map because of the impacts of trends such as: rising regulatory expectations, disruptive deregulation initiatives, emergence of novel risks, explosion of data, quantifiable successes in artificial intelligence (AI), and changing consumer expectations.

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LESSONS LEARNED: RECORD HACKS, BREACHES TO CONTINUE IN 2018 AS MORE CRIMINALS MONETIZE STOLEN DATA

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As ACFCS surveys the landscape of what new challenges and opportunities in financial crime 2018 will bring, we are continuing our “Lessons Learned” series, asking key thought leaders what last year taught the community and how that knowledge should help arm compliance professionals for the year ahead.

Not surprisingly, a good predictor of what will happen in 2018 is rooted in trends from 2017, a year where criminals made history with record hack attacks and equally massive data hauls that put millions of people and companies at risk.

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Data integrity can no longer be neglected in anti-money laundering (AML) programs

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Data integrity can no longer be neglected in anti-money laundering (AML) programs

The New York State Department of Financial Services (NYDFS) risk based banking rule, went into effect on January 1, 2017 and will have a significant impact on the validation of financial institutions’ transaction monitoring and sanctions filtering systems.  The final rule requires regulated institutions to annually certify that they have taken the necessary steps to ensure compliance. 

Data integrity is particularly interesting because it arguably hasn’t been given the same emphasis as other components of an effective anti-money laundering (AML) program, such as a risk assessment. 

There has always been an interesting dynamic between the way compliance and technology departments interact with one another.  This new rule will force institutions to trace the end-to-end flow of data into their compliance monitoring systems which could be a painful exercise.  This exercise will demand the interaction between groups which may have stayed isolated in the past and it will require some parts of the organization to ask tough and uncomfortable questions to others.  Clearly, gaps will be found and remediation projects will have to be launched to address those items. 

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