Strengthening Compliance to Meet Global Standards and Avoid Penalties with RegTech
“Expert regulatory technology can help FIs to future-proof compliance and avoid enforcement actions that incur substantial monetary penalties and reputational damage. With the potential costs of failure very high, it is vital to choose a RegTech provider that has a strong market standing for excellence.” – Rohit Mittal, Financial Crime Compliance, Market Planning, LexisNexis® Risk Solutions
Indian banks are under growing pressure to ensure their anti-money laundering and countering the financing of terrorism (AML/CFT) measures align with global standards. In a recent report, the Financial Action Task Force (FATF) highlighted numerous compliance weaknesses in Indian financial institutions (FIs) and called for regulators to impose more “dissuasive” monetary penalties.
The intergovernmental body published in September 2024 a 368-page mutual evaluation report on India’s compliance with global AML/CFT standards, based on an onsite visit in November 2023. In the report, FATF assessors expressed concerns over the quality and speed of suspicious transaction monitoring and reporting by FIs in India. They noted that some firms took 45-60 days to review and make decisions on alerts for simple issues and took even longer in more complex cases.
FATF assessors also raised concerns over whether Indian FIs are adequately countering terrorism financing (TF). Most of the FIs that assessors met were unable to demonstrate “how they transposed their knowledge of TF risks into, for instance, controls and alerts to monitor transactions” in the conflict areas highlighted in India’s 2022 National Risk Assessment.
Assessors were critical of the level of enforcement actions taken by regulators. They found the monetary penalties issued to FIs were “limited in number and value and not sufficiently dissuasive”, particularly for larger banks. They called for regulators to impose more substantial fines against FIs and to remove the managers responsible for compliance breaches. Last year, the RBI issued 261 penalties worth a combined INR 78.6 crore, of which two were for INR 5+ crore each over AML/CFT failings.
As an export-oriented country, India’s reputation for financial crime compliance affects its position on the global stage. It is vital that Indian banks rapidly screen for suspicious activity and implement robust controls to prevent sanctions violations and illicit activity. In 1H2024 alone, there were 146 updates to UN, EU, UK and US sanctions lists and 2,340 net designations added. The rising sophistication of financial crime is estimated to cost the global economy over INR 117.7 trillion a year.
Boosting compliance and operational efficiency with RegTech
Tier 1 global and Indian banks trust LexisNexis® Risk Solutions to provide consistently high results. With data analytics and automation built into its expert solutions, compliance teams can rapidly screen customers, detect suspicious activity and manage risks. This best-in-class and configurable technology empowers compliance officers to confidently make important decisions quickly, using the relevant information.
LexisNexis® Firco™ Continuity enables banks to rapidly and accurately detect suspicious transactions in multiple jurisdictions. The solution offers sophisticated, robust, and efficient real-time screening of millions of transactions. Firco™ Continuity helped a large regional banking group to save $3 million (INR 25.2 crores) in screening costs and to reduce false positives by 50%, despite transaction volumes nearly tripling over a 12-month period. A multinational bank similarly reported that Firco™ Continuity automatically qualified 75% of alerts in scope and reduced operating costs by 20%.
LexisNexis® Firco™ Trade Compliance also drives major operational efficiencies while enhancing compliance standards. Its controlled goods screening engine helps users to identify dual-use and military goods. The software’s searchable database enables accurate identification of vessels connected to OFAC-sanctioned countries and the companies that manage and operate them. Compliance teams have used the solution to automate their screening of trade finance customers, to boost turnaround times for processing applications, and to reduce the resources needed for compliance checks.
LexisNexis® Risk Solutions’ advanced RegTech solutions are used by 8 of the world’s top 10 banks. They are so well regarded that regulators around the world also use LexisNexis® Risk Solutions to support their day-to-day work. The company’s close relationships with regulators means that all content is aligned with their exacting requirements and that they are familiar and comfortable with the solutions.
Preparing for supervisory scrutiny with the right tools & partnerships
The rising complexity of financial crime is creating unprecedented demands on compliance teams. Industry-leading RegTech solutions turbo-boost turnaround times by reducing false positives, detecting suspicious transactions, and streamlining trade finance screens. They empower compliance teams to efficiently ensure full alignment with regulatory requirements and internal policies, both locally and globally.
The ROI can be measured in the scale of the financial and reputational costs averted, as well as in the cost savings and operational efficiencies achieved. Best-in-class RegTech like LexisNexis® Risk Solutions empowers compliance teams to focus on business enablement, which ultimately strengthens the firm’s bottom line.
If your firm is ready to discuss about future-proofing its compliance operations, contact the team at LexisNexis® Risk Solutions via this link here.
