Exclusive interview with Vera Akiotu, Director of Financial Crime Compliance Proposition at Dow Jones: “The main challenges entities are faced with today lie in the use of outdated technology, limited data integration, and the sheer complexity of the regulatory environment”.

TDB: In the backdrop of an increasingly complex and sophisticated financial crime landscape that continues to test the resources of financial institutions, how can market participants remain compliant amid an evolving regulatory landscape? What are the primary gaps in their existing capabilities to mitigate such risk?

Vera Akiotu, Director of Financial Crime Compliance Proposition at Dow Jones: When it comes to staying compliant amid an ever-evolving regulatory landscape, firms need to focus on several key strategies. Especially for financial institutions, beyond the establishment and maintenance of a comprehensive compliance programme, having one that is adaptable to new regulatory requirements is crucial in keeping up with the changing landscape.

At Dow Jones, we have seen an increase in financial institutions utilising advanced technology solutions – such as artificial intelligence and machine learning algorithms – to improve the detection and prevention of financial crimes. And it’s not hard to understand why. Sanctions compliance has become increasingly complex, with its sheer volume and frequency, not to mention the intricacies of sanction types. We’re witnessing now more than ever that when institutions refer to sanctions, they no longer solely mean those directly sanctioned but also entities connected to sanctioned subjects. This has resulted in increased interest in our sanctions control and ownership data covering those owned or controlled by subjects sanctioned by OFAC, the EU, and the UK. The importance of strengthening processes for customer onboarding, and transaction monitoring and screening for sanctioned entities, cannot be overstated as well.

However, the main challenges entities are faced with today lie in the use of outdated technology, limited data integration, and the sheer complexity of the regulatory environment. As data and technology evolve, so do the expectations of the regulators – what’s considered compliant today might not be tomorrow. In fact, reliance on legacy systems that lack the agility to adapt poses significant risks, especially with multifold approaches by illicit actors getting more sophisticated.

Another primary gap includes the lack of synergy between business lines, most notably for firms with limited integration of data across different business units, which can inevitably hinder holistic monitoring of suspicious activity. Financial institutions are also often confronted with difficulties in interpreting and operationalising frequently changing requirements across multiple jurisdictions. For instance, OFAC’s extraterritorial reach is one example of firms having to comply with both primary and secondary sanctions.

Overall, old systems, challenges with connecting the dots and the tricky regulatory landscape are some factors that impede institutions from staying on top of compliance risks.

TDB: How can financial institutions leverage emerging technologies, such as artificial intelligence, advanced analytics and blockchain, to augment their risk control efforts in identifying sanctioned entities and maintain regulatory compliance?

Vera Akiotu: Financial institutions can tap on emerging technologies like artificial intelligence, advanced analytics, and blockchain to enhance their risk control efforts in several ways. With the advent of AI, analyses of vast amounts of data to identify patterns and inconsistencies that may indicate potential risk alleviates operational stressors while improving precision. AI-powered algorithms and big data – both structured and unstructured – provide financial crime compliance professionals the tools to contextualise more information in less time, reducing the effort required for manual screening.

Furthermore, as AI can be trained on vast amounts of historical data, enabling it to learn from patterns and make predictions, models can be updated upon encountering new variations resulting in a better understanding and consequently, identification of potential risks. This iterative learning process allows the technology to stay agile and improve its performance over time.

One example of AI revolutionising compliance management would be in using it to detect sanctioned entities. Traditional name screening methods often result in a large number of false positives, leading to a significant amount of manual work to separate legitimate matches from irrelevant ones. AI algorithms are able to automate this, monitoring transactions at a high degree of accuracy to reduce the number of false positives.

Advanced analytics can provide financial institutions with powerful insights into their customer data, enabling them to more accurately detect and assess risks. This can include predictive modelling and scenario analysis to anticipate potential compliance issues. Blockchain technology can also be leveraged to maintain accurate records of transactions, reducing the risk of fraud and ensuring compliance with regulatory requirements.

As financial misconduct evolves to take on a more sophisticated shape and form, technology will continue to play a vital role in improving the efficiency of risk and compliance management while lowering costs for institutions.

TDB: Given the accelerated digitalisation observed in the financial services industry, development of alternative business models & asset classes as well as emergence of new market entrants, incumbent financial institutions are under pressure to retain their competitive position. Is there scope for financial institutions to reconcile commercial pressures and operational efficiencies with new regulatory mandates?

Vera Akiotu: While it’s a balancing act for institutions, the good news is that there is scope for them to find a middle ground which can lead to broader financial crime compliance coverage – and increased bandwidth for deeper human analysis – without unreasonable impact on costs or resources.

Many financial institutions are looking at digital transformation efforts to enhance operational efficiencies while complying with evolving regulations. Embracing technological innovations, such as AI, can help streamline processes and meet regulatory requirements. The pervasive integration of AI into business operations, notably in the APAC region, is becoming increasingly evident, underscored by the Singapore government’s recent commitment of S$1B towards augmenting AI capabilities over the next five years.

In addition, fostering open dialogue with regulatory bodies and staying abreast of changes in the industry is another important aspect to finding common ground between commercial interests and regulatory requirements.

TDB: Where does the recently launched ‘R&C Financial Instruments’ solution from Dow Jones fit into this new paradigm as the costs of non-compliance weigh down market participants and institutional investors?

Vera Akiotu: With geopolitical events and trade tensions on the rise, APAC is certainly feeling the pressure to upkeep rigorous processes that not only identify and mitigate potential threats, and their associated instruments, but also ensure adherence to complex cross-border mandates and sanctions regimes. Our R&C Financial Instruments solution was developed with these in mind, to help market participants and institutional investors navigate the complex landscape of sanctions compliance.

By combining best-in-class entity data with unparalleled securities mapping from BIGTXN, Dow Jones’ Financial Instruments solution empowers firms to thoroughly screen their entire investment portfolio against over 50 jurisdictions and entities that are owned or controlled by sanctioned individuals. We provide coverage of securities across all asset classes, including equity, debt, exchange-traded funds (ETFs), and derivatives.

We strive to enable firms to proactively address the challenges associated with non-compliance costs, manage risk and ultimately make more informed decisions to enhance their overall risk management approach. This can lead to better financial outcomes and reduced regulatory risk in this evolving environment.

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