A global survey of 132 senior executives from financial institutions (FIs) around the world has surprisingly revealed that 86% of respondents are expecting a bigger anti-fraud budget in 2013, versus 45% and 47% in previous years when Detica NetReveal has run its ‘Operational Risk and Regulation: Financial Crime Survey’.
The cause of the expected upturn in 2013 fraud management and financial crime compliance budgets is no doubt due to the heavy fines imposed recently on HSBC and Standard Chartered bank for breaching money laundering and sanctions rules, and the impetus this has given banks to spend more money on compliance measures. For anti-money laundering (AML) in particular, 84% of those surveyed expect increased budget in this area to rise in 2013 (compared to 34% and 38% in previous years), but many organisations are still grappling with the effectiveness of automated detection systems, warns Detica Net Reveal, which is part of BAE Systems.
Specifically for fraud management, battling internal and customer-based attacks, 86% of respondents are forecasting budget growth, and highlighting the application process, payments, the online channel and insider fraud as priority areas of focus.
The proposed supra-national US Foreign Account Tax Compliance Act (FATCA) legislation, which seeks to get US tax avoiders but applies internationally and puts burdens on all FIs, is also cited by 44% of the 132 survey respondents as a cause for concern and requirement for extra money.
Whether the respondents get all the extra money they are expecting must be up for debate of course when banks and FIs are facing large increases in their capital ratio requirements under the impending Basel III regulations and more and more money is simply being spent ‘keeping the lights on’ feeding antiquated systems.
Nevertheless, Detica NetReveal is confident its predictions for continued investment in financial crime detection and prevention are correct because of regulatory and market drivers – such as fines / reputational damage and rules – that cannot be ignored. Interestingly, cross industry data sharing is becoming more common place among FIs, finds the survey, with almost 50% of respondents now operating some kind of data sharing scheme. Privacy laws and data protection are cited as the major barriers to further anti-fraud data sharing.
According to George Robbins, UK general manager and director of Detica NetReveal: “As the financial services industry stabilises, we are seeing strong evidence of investment catch-up, with FIs increasingly recognising the power of technology to identify and prevent fraud. Regulatory pressures continue to drive compliance budgets,” he added, “along with new challenges, such as FATCA, generating new waves of activity.”