Financial crime is a trillion-dollar industry with “enormous social and economic implications” – this is according to a World Economic Forum report, which also highlights that as little as 1% of criminal funds flowing through international financial systems every year is believed to be frozen and confiscated by law enforcement.
I have written before about what I believe to be the scourge of the silo mentality – in the financial world silos are everywhere. A silo can be a process, system, department, database or anything that operates in isolation; and when operating in a silo, it can be difficult or impossible to communicate and relate to other entities outside of the silo. Indeed, the term ‘silo mentality’ arose due to teams working in isolation from other teams and the breakdown in communication between them.
An overview of internal processes within each organisation, coupled with effective communication across separate departments and a central point of control are as vital to each individual organisation, as they are to entire business sectors. There are many reasons why silos occur – think geographically; including country borders, languages and cultural differences; which can all lead to compartmentalising. So too can technical barriers, data barriers, industry silos (businesses working in isolation with no collaboration).
We should remember that silos may sometimes be required or desirable. This could be due to regulatory issues where crucial customer data, processes or general intelligence needs to sit apart. Or where silos can create genuine focus and expertise, rather than a solution more akin to a jack of all trades and master of none.
There are myriad other reasons why technology and data silos may have been created, including the recent explosion of technical capability, new data insight and the birth of Fintech and RegTech – giving businesses far more choice.
To help today’s businesses manage identity and detect fraud, as well as comply with legislation, there are many, many options to consider. Legacy technology makes it hard to create the central view, so many ‘pile’ capability on top of other checks. Add to this a demand for cross border growth, and FinTech type businesses that may now have outgrown their original tech stack; and you can soon see the scale of the potential problem.
The financial industry continues to take a siloed approach to providing financial services, with financial institutions having to manage several partnerships to provide the full spectrum of services to keep their account holders satisfied. Data and technology silos produce many issues, but let’s concentrate on the main ones:
–Accuracy: a lack of accuracy in making a risk decision or missing a compliance or fraud risk can obviously have serious implications.
–Spiralling costs of IT: as we’ve seen, a lack of ability to quickly share data and insight across applications means incorrect decisions are made. It can also mean that it’s necessary to create manual processes to move the data and insight. However, silos require IT and development time and cost, and when information is held in established systems, updating those systems can be slow, expensive and sometimes impossible.
– Lack of agility: it’s clear that silos create both cost and a reliance on IT, but perhaps the bigger risk is the lack of agility that this leads to. Why can’t the owner of fraud or compliance make a rule change to adapt to a dynamic fraud threat? Why can’t I integrate this new reference file or dataset that I can prove will reduce my risk? It is because the current model of being reliant on suppliers and IT departments to integrate and change systems is outdated and leads to increased risk on a business.
Many companies tolerate the status quo because they can’t justify the case to move suppliers. This is symptomatic of businesses that are set up in silos. Inherently, each silo must be upgraded independently leading to multiple projects across multiple departments. This incurs extra costs and time, it involves multiple separate projects each requiring their own unique resources and supervision. This is why businesses often choose not to act despite all the clear signs, and instead prioritise other simpler projects in the development stack.
I will be speaking in more detail about the scourge of silos as a key speaker at the FFE CON 2018. Hear my Disruptive Perspective first hand in the aptly named Disruptive Den.
To those who would like to talk in greater detail about the issues discussed, and how TruNarrative’s unified approach can breakdown organisational silos and streamline your on-boarding and financial crime management strategies contact me directly on 07393 192420, or Click here to book a demo.