Digital dials down risk

Despite the differences in scale and resources, small and medium-size financial institutions must meet the same regulatory requirements as huge financial conglomerates. And the consequences of non-compliance can be far more devastating to smaller firms. This was the situation facing a leading multinational payment company when it came to detecting and reporting on financial crime.

Not only that, but to retain and grow new business, the company needed to meet the golden standard of transaction monitoring and investigation efficiency. The firm services some of the world's largest banks, managing their clients' cross-border payment activities. And these global banks could not work with our client if it had inadequate compliance controls.

Looking for a needle in a haystack

The payment firm maintained a team of compliance analysts globally that were struggling to meet compliance demands. They had to manually comb through more than one million transactions of cross-border payments each year, searching for suspicious transactions, incidents of money laundering, counter-terrorism financing, and fraud.

Analysts were poring over reams of paper-based spreadsheets that included daily, weekly, and monthly reports and contained tens of thousands of customer-transaction entries. The process was time consuming and error prone. After all, how well could an analyst reasonably be expected to perform when reviewing the 20,000th transaction in a report?

To further complicate matters, the company had operations in the US, UK, Australia, and Canada, which meant that it had to answer to four regulators, each with different requirements and timelines for reporting.

The company realized that technology is the great equalizer. In search of a solution, it engaged Genpact to bring automation to its compliance function.

It had data in multiple legacy systems that had been cobbled together over time. So Genpact started by pinpointing the relevant data attributes, such as the transaction beneficiary, that existed in these disparate systems. Then, we implemented all modules of our product suite, riskCanvas^TM.

riskCanvas^TM automatically ingests the company's transactions nightly, reviews them against a variety of rules that Genpact develops with the payment firm, and creates alerts to highlight potentially suspicious transactions. The next day, analysts need to only review and validate any alerts.

Once an analyst confirms the alert, the transaction enters the case management module of riskCanvas^TM. Using this module, the analyst conducts an investigation, attaches documents and notes detailing findings, and escalates the transaction to senior management. Management then decides whether the company will file a suspicious report to one of its global regulators.

In the past, analysts had a growing backlog of transactions to review; now they can keep up. And instead of painstakingly reviewing lines of transaction data, analysts are free to be more specialized and focused. Some are reviewing alerts, some are investigating suspicious transactions. But all are able to perform their functions more efficiently and effectively. This allows analysts to spend more time on what matters: assessing customer and activity risk.

The company also has a single view of its customers, including whether and how frequently they have engaged in potentially suspicious activities, whether and how often they appear on sanctions lists, and what their overall risk score is. This level of insight helps the firm accept customers that would have been beyond its level of risk tolerance in the past, driving business growth.

The partnership with Genpact continues today. Together, we are working on a machine learning solution that will enable the company to identify patterns of behavior that don't match up with expectations. The solution will detect whether there are any anomalies in client transaction patterns, draw inferences from the data, and refine rules over time to keep them in tune with actual and evolving client behavior.

Call it corporate Darwinism. To be sure, those companies, like our client, that digitally transform their operations to suit new ways of conducting business will survive and thrive.