FinCrime Risk and Compliance: Are Advanced Technologies Really Changing the Game?
Originally published on LinkedIn October 20, 2017
We are all fascinated with the prospects of advanced technologies within the financial crimes risk and compliance space. Advanced technologies are key to enabling optimal performance across all facets (governance, programmatic, and operational) of a financial crimes risk and compliance program. Whether it be the tool for collecting and exploiting external and/or internal enterprise data (e.g., metrics — KRI), or enabling workflow (e.g., analysis, investigation, reporting, etc.), or the mechanism for extracting data derived from workflow (e.g., metrics — KPI) — advanced technologies are desperately sought after to ease management’s pain of continuously addressing costs associated with human capital (be it recruiting, onboarding, headcount maintenance and retention, etc.).
Is our fascination or obsession with advanced technologies (e.g., Machine Learning/AI) the cart before the horse? I would argue yes! Having been in, out, and around various financial institutions over the past decade I too often see this critical buying mistake take priority over investing in the right people. In this article, I explore how the right leadership and the right overall human capital model are quicker to optimal performance than any technology solution can ever be. I caveat this statement with the understanding that technology absolutely comes into play but only when you have the right humans (workforce) organized and tasked first!
What is the right leadership and human capital model in this space?
My advice to a financial institution seeking a financial crimes risk and compliance leader is simple — hire (1) an executive, or at minimum an experienced senior management operator and (2) ensure that they are big thinkers, or at minimum talk about strategy in every other sentence! Why do I point to these high-level attributes? Well, the leader has to motivate and cultivate an enterprise along with appeasing a long list of constituents. Understanding how to operate and influence at the executive level is a must! Additionally, this leader must see the sphere of moving parts that impact a financial crimes risk and compliance program. Those moving parts are everything from global events, emerging global risks, multi-jurisdictional legislation, and how the enterprise or business itself grows. Only a big thinker or strategist can absorb those moving parts and build a programmatic framework for keeping pace while continuing to drive the daily (tactical) execution of the program.
As for the human capital model — while the new buzz is flat organizational structures — I would argue that a functional organizational structure (with logical levels of hierarchy) is key and critical to a financial crimes risk and compliance program. Having structure within this space is the foundation to aligning strategy with execution, #1 and #2 structure brings about consistency — starting with training, inputs, tasks/activities, and ending with outputs. So, who are the right people for this model? Tough question, even after having hired hundreds of people in this space, I am reluctant to say there is a clear-cut profile. However, I would have to say that a person who thrives off of structure and is motivated by a clear strategy to execute a mission to achieve an ongoing (almost never ending) objective is best suited for these environments.
We could further explore leadership and the overall human capital model extensively, but I will leave the foundational statements where they are for this article. With that –
What does the right leadership and human capital model get you or where does it position you?
I would answer that question profoundly by saying it gets you really far down the playing field and positions you for sustainable success! Moreover, it positions you for actually being able to focus on advanced technologies as your next logical evolutionary step in running a strong financial crimes risk and compliance program. How might this position you exactly? The biggest pitfalls to procuring technologies prematurely are having disparate sources of data and disjointed workflows that in turn create mass chaos on a day-to-day basis. You cannot integrate data and align workflows without having the right people in place as the foundational step. Think of it this way in short: PEOPLE — PROCESS — TECHNOLOGY (“PPT”). This principle or triangle has a sequence for a reason! Following the sequence will position you strategically and yield real results!
The Ultimate Point
As we see more articles titled “how Artificial Intelligence is transforming the financial crimes space” or as we listen to panels at industry conferences talk about how people are being replaced by technology — think about the reality of this very important professional field. That reality is that people are the foundation and always will be — investing in the right ones and ensuring that the right model is built will be the most tangible return on investment (ROI) a financial institution can measure. Secondary to that will be procuring the right advanced technologies that enable the right people to achieve the highest levels of optimal performance and ultimately that next level of ROI.
In sum, this article does not intend to discount the value of advanced technologies (I am an advocate) — it simply points out an appropriate sequence and focus on how financial institutions should approach investing in their financial crimes risk and compliance programs.
