Financial institutions in Asia boost efforts to tackle financial crime amid regtech push

Financial institutions in Asia must employ strategic approaches to address financial crime by applying appropriate regulatory technology (regtech) tools and tactics, consultants at Deloitte Southeast Asia said. Firms will also need to arm themselves with sufficient knowledge of regtech, and establish diverse, cross-functional, cross-regional teams, experts at the firm wrote in a recent report.

The financial crime landscape in Southeast Asia has been transformed by digitalisation and the more widespread use of advanced technological tools. Technological development is the way forward, especially in the rapidly changing financial services and transactions eco-system. Against this backdrop, firms need to behave differently to garner the best results, according to the report, entitled ” Transforming Financial Crime Management Through Technology“.

The report analyses recent financial regulatory developments and enforcement actions, and includes five case studies involving major banks from the various Asia-Pacific jurisdictions, each of which provides industry practices and insights into how technology is being used to prevent and detect financial crime.

“Enhanced technology capabilities with the use of artificial intelligence [AI] and machine learning help sharpen detection and prevention ability,” Radish Singh, financial crime compliance leader at Deloitte Southeast Asia, told Regulatory Intelligence. “It is granted that each financial institution will have their unique risk appetite and their own approach to assess how they intend to upscale their technology capability … be it through in-house creation or ecosystem partnerships.”

Quick wins

There are some quick wins on which the financial services industry can focus to enhance its ability to fight crime, according to Singh. These include the use of AI or machine learning for detection and prevention of financial crime, to help firms achieve a dynamic understanding of, and to address, customer-related risks. Firms also needed to take a holistic approach to monitoring financial crime by collapsing silos and enhancing human capital skills, she said.

“Technology cannot operate on its own; human analysis and judgement are still needed,” she said.

Public-private partnership initiatives are imperative to help speed up industry utilities that will give financial firms a vantage point on the detection and prevention of financial crime, she said.

Case study

One of the case studies included in the Deloitte report describes how a Singapore-based bank has armed itself with various tools — including AI, machine learning, natural language processing, robotic process automation, big data/data analytics and cloud computing — to help with the fight against financial crime. The bank has a large presence in Asia, and offers a broad range of services such as banking, investments and asset management. The bank has made considerable efforts to foster, accelerate and promote fintech start-ups across Asia.

The case study outlines in particular the upgrades the bank has made to its transaction monitoring and name-screening alert processes. It also showcases the technologies the bank has used — including robotic process automation, AI-aided machine learning and natural language processing — within its end-to-end “anti-money laundering suite” integrated solution. The project took almost three years to complete from its inception to the business-live phase, the report said.

Regulatory developments

The Payment Services Act has helped to consolidate the regulation of payments providers in the city-state’s regulatory landscape, Deloitte said in the report.

Fintech associations such as the Association of Cryptocurrency Enterprises and Start-Ups Singapore are working together to develop a voluntary code of practice to extend Singapore’s anti-money laundering/combatting the financing of terrorism (AML/CFT) regulations to crypto firms.

The Monetary Authority of Singapore has also revoked the licences of various Singapore-based asset managers and trust companies for breaching AML requirements, and for internal control failures related to AML/CFT risks.

Regulating crypto assets

The Payment Services Act and the PSNO2 set out requirements that seek to bring major players in the crypto-assests sector under the ambit of the regulations, Singh said.

“Regulating crypto assets is a global initiative, which means that we need globally consistent standards on licensing, investor protection, transparency, anti-money laundering and monitoring obligations,” she said. Technology and the digital nature of crypto assets mean that monitoring and regulating such assets should only get easier, therefore, although the opacity of crypto transactions remains a concern, she said.

“There are a number of service providers today that provide data and augment capability in monitoring any potential crime, whereas the financial services sector is still working through its know-your-customer and monitoring requirements where its clients touch a crypto-asset transaction, or it is simply being a service provider to a crypto exchange,” she said.

“The standards are not yet harmonised; this is work-in-progress. As always, my view is that public-private partnership can help in creating the said ‘common standards’ for the industry.”

Written by:

Zeng Yixiang, Regulatory Intelligence Correspondent for Southeast Asia, Thomson Reuters

Thomson Reuters, a worldwide trusted provider of answers, helps professionals make confident decisions, run better businesses and gain competitive advantage in complex arenas – law, tax, compliance, government and media.

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