09 December 2008 – Dublin, Ireland – Research among international financial services organizations undertaken by Norkom Technologies reveals that those that have adopted an enterprise-wide, risk-based approach to the management of money laundering and fraud are achieving substantial cost savings and performance benefits.

Sixty-four percent of organizations that have consolidated their crime fighting operations and implemented unifying technologies have achieved cost savings of up to 34%. In addition, 68% report up to 40% improvement in their crime detection performance.  

“For the past three years, our annual research program has charted the industry’s progressive move towards an enterprise-wide approach to financial crime,” says Norkom’s Managing Director of Global Solutions, David Dixon. “Irrefutable evidence that this approach is paying dividends could not have come at a better time. In the recessionary aftermath of the credit crunch, the pressure is on for the whole financial services community to demonstrate operational effectiveness and economic efficiency in every area of business – financial crime management no less than any other. Savings of the magnitude observed in our research will make a significant contribution to organizations’ bottom line,” says Dixon.

Norkom’s research also makes it clear that financial crime continues to increase dramatically. Sixty percent of respondents say they’ve seen an increase in fraud attacks on their business in the past 12 months. Norkom believes that this, coupled with increasing regulatory scrutiny, is driving financial crime management up the corporate agenda. The research reveals that more than half (56%) of organizations now view financial crime and compliance as part of an overall operational risk challenge and manage them accordingly under a single operational risk management governance model.

“If this trend to elevate fraud and AML is, as we believe, symptomatic of a broader move to improve the disciplines of risk management within financial institutions it is one that regulators in the post credit crunch world will undoubtedly welcome,” says Dixon.

In addition to the elevation of financial crime’s risk management status, Norkom’s research also reveals evidence of greater strategic focus and planning. Fifty percent of respondents now have fully articulated three-to-five year strategic plans to develop their financial crime fighting capability and, in 79% of cases, those plans embrace the entire enterprise – all geographies and all business units. A further 22% will develop such plans over the next two years.

“In today’s tough economic climate, companies may be tempted to relax their focus on financial crime management, cutting costs in an arbitrary fashion to achieve short-term gain. They will do so at their peril, exposing themselves to criminal infiltration and regulatory attention. This report provides clear evidence that, though financial crime continues to rise, the fight to prevent it can be mounted cost-effectively,” concludes Dixon.

Norkom’s research also indicates that the regulators – who until now have concerned themselves only with the industry’s anti-money laundering (AML) activities – are now turning their attention to other areas of financial crime. 40% of respondents note increased regulatory interest in their fraud management activities. “The first indication that regulators intend to increase their jurisdiction to fraud has appeared in France, where, this year, the regulator has initiated a review of its top tier financial institutions for proof of fraud risk governance,” says Dixon. “The history of regulatory progress, in which activities initiated in one country are rapidly adopted by others, suggests that this trend is likely to spread across the globe”.

It is clear from the research that some organizations are already preparing for that eventuality, applying disciplines and approaches used in AML to their anti-fraud activities. Forty percent of respondents say that that their fraud operations are already using and deriving benefits from disciplines developed in AML environments, including ‘Know Your Customer’ (KYC) and ‘Customer Due Diligence’ (CDD).

Click here to download your free copy of Norkom’s research whitepaper
‘Conquering Crime: Building sustainable financial crime infrastructures.’

NOTES FOR EDITORS

Research methodology Research respondents were taken from the full spectrum of financial services companies including retail banks, commercial banks and integrated financials services companies. 14% of organizations polled had assets between US$1 billion and US$10 billion, while 53% had assets over US$10 billion. The research was completed using an online survey tool during summer 2008.