Challenge
In the financial industry risks increase with the emergence of more and more complex products and increasingly interconnected markets in a globalised world economy. As a consequence the financial industry is facing mushrooming regulations, designed to protect the individual country, the consumer, the tax payer or the market participants themselves.
Recently created or re-enforced regulations include the Basle II & III accords, the Sarbanes-Oxley Act, The Market Abuse Directive, various Anti-Money-Laundering (AML) & Anti-Terrorist-Financing regulations, MiFID and MAD directives, Dodd-Frank, to name just a few of them.
Solution
Not complying with regulations is not an option as regulators may – and have in the past - impose severe penalties on the firm or on individual employees.
Complying with all regulatory requirements without specified software has become next to impossible and there is respective standard software with different focuses on the market.
The key challenge is not the software selection itself, but to implement it in a way that provides the most benefit to the company.
Similar to fraud protection key components of any solution will have to include
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 | Risk analysis, i.e. identifying in which types of business offending behaviour is most likely and which are the most likely types of offending behaviour |
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| Requirements definition and prioritisation according to risk mitigation capabilities |
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| Analysis of the business environment (transaction paths, trade flows etc.) and technical environment |
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| Analysis of the technical environment (front/back office systems involved, systems in-tegration, interfaces etc.) |
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| Options for organisational adjustments, e.g. workflow management, sign-off proce-dures, reporting, etc. |
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| Implementation of specific monitoring software |
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Our Approach
Accordingly, our approach will focus on:
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| Risk analysis to determine priorities of implementation:
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| > | Which business does the bank undertake that falls under the applicable regulations? |
| > | Which offending behaviour is most likely or has been noticed before within the bank itself or in its peers? |
| > | Which types of offending behaviour are under specific focus of the regulators? |
| > | Which types of offending behaviour in which types of business are likely to have the biggest negative impact in terms of reputation, financials or other regulatory meas-ures?
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| Business process analysis and re-design – This includes analysing the processes around the previously identified most risky business operations and identifying additional organisational controls where beneficial.
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| Requirements definition and prioritisation – This involves – as far as possible - measurements of involved risks and cost estimates of envisaged solutions leading to high level cost-benefit-analysis from which priorities will be derived.
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| Definition of quick wins and organisational adjustments
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| Implementation of specific monitoring / compliance software - Depending on the focus of the effort software to be employed may consist of
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| > | Dedicated compliance monitoring software, e.g. Mantas or Actimize monitoring for potential cases of money laundering and terrorist financing (AML) or market abuse in financial markets (Trade Compliance Monitoring, TCM).
For more than six years we have worked on the various stages of implementation and worldwide roll-out of Mantas at a Swiss universal bank and a major London invest-ment bank, working on the vendor side as well as on the bank side, giving us an in-sight into all key areas of such implementation
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| - | Business analysis. Analysing understanding the different ways transactions may be be initiated and processed through different front-, middle- and back-office systems to serve the requirements of the business and the customers. |
| - | Data sourcing and data mining. Identifying sources for required data internally and externally, e.g. for market data, and identifying the different transaction types and transaction flows within the data. |
| - | Staging area design and processing. This includes the detailed design, trade flow analysis, specification and any development needed to extract required data from the sources and prepare it in such a way for ingestion into the selected Monitoring Software so that the monitoring and case analysis will be most effective, which means minimising false alerts without missing any potential valid alert. |
| - | Software configuration, adjustment and customisation where necessary. |
| - | Thorough testing and refinements of the set-up. |
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| > | Dedicated conflict management software, able to check new investment banking deals for potential conflicts of interest and manage required Chinese walls and wall crossings. Administration of restricted trading lists.
G&C has been leading the requirements definition and functional design for such sys-tem at a major UK investment bank.
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| > | Special reporting systems based e.g. on Business Objects or other reporting software to analyse and present data according to specific aspects that are of interest. |
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| Effective project management ensuring project objectives are met on time and within budget.
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