Are Compliance Operation Functions ready for the wave of Next Gen capabilities?
November 4, 2022
As firms move towards more sophisticated technologies to assist with their compliance obligations, the industry needs to consider the scale of education and skills needed to underpin this direction.
The change in technology and in particular vendor tooling capabilities is fundamentally challenging existing industry norms and expectations as new and more sophisticated means of monitoring and detection are introduced. Coupled with a growing realization within firms that compliance like functions need to be more cost conscious and supportive of business growth, this is allowing firms to challenge their existing technology and processes with a move towards more automated and sophisticated means to detecting risk, reduce false positive production and minimize the level of manual case handling needs.
With the adoption of capabilities like entity resolution, a growing use of third-party data sources, network analytics, contextual monitoring, as well as machine learning and other data analytical techniques, the quality of monitoring is vastly improving and the detection of risk outputs are much more complex compared to today’s basic periodic review cycles, rule based alerting and screening detection methods. As a result, the benefit of reduced false positive detection will come at the cost of more complex investigative needs.
The success of a firm’s investigation program is guided by the efficiency and effectiveness of the processes that underpin production of financial intelligence, as well as the knowledge and wisdom by the firm’s case handlers. It is also important to realize that case handlers operate in an organizational context. Firms and their staff need to understand how to interpret the stimuli in their surrounding environment, and how these interpretations are reflected in the actions and decisions that such individuals ultimately take.
An investigation is a journey of gathering fact, information and applying context to gain knowledge. Over time experience also imparts wisdom. Each investigation has its own unique situations that require the case handler to take different consideration into account, even when seemingly looking at similar situations seen in the past. During the investigation, a case handler will be required to collect, analyze and assess a variety of data inputs and other information sources in order to reach the various conclusions needed to ultimately make the necessary decisions, such as whether a case is deemed to be suspicious or not.
This shift toward more enhanced capabilities is not only going to make investigative needs more complex but will also shift these needs earlier in the process. As a result, what was once primarily the domain of level two case handling functions (critical thinking and judgement-based decision like functions), is going to become more of the norm for level one operational teams. This also means the higher costs typically associated with skills sets within level two functions, will migrate into level one operations on a larger scale.
skills and workforce optimization are a challenge firms will need to solve if they want to embark upon the next generation of approaches, else they run the risk of a disparity between detection output management needs and the skills required to manage those outputs effectively, and ultimately solve one problem, only to make another.
Firms are usually faced with two approaches to skills acquisition, educate their staff or hire the skill set. Many firms tend to rely upon hiring specialized skills sets rather than investing in educational setups within their own organization. This is often due to the long learning times needed to build the experiences and knowledge necessary. Coupled with the fact that many of these specific skill sets are in short supply, means that these skill sets come at a premium cost.
While training is a regulatory requirement, more complex educational needs are still often challenged within firms. Taking people “off the floor” to attend or deliver training programs impacts production, challenges SLA’s and creates backlogs, all of which have their own complications with regulators, internal compliance organizations, business units and the customer experience. Larger firms are also challenged with higher attrition rates and continual need to onboard quickly large numbers of people. Due to this, training is often hindered by a mindset that it must be non-invasive and have minimal impact to production, often resulting in speed to market training approaches that promote prescriptive procedural application and general awareness rather than develop foundational skills.
With the shift in technology and desire of firms to move in this direction, the industry is faced with a conundrum when it comes to skills availability to underpin this adoption. Hiring the skills will only become more challenging in the short term as firms’ cherry pick the best skill sets. Until educational programs in universities and colleges adopt more of these courses into their curriculums, there is no ready pipeline of future talent. As a result, firms are going to re-need to think not just their technology strategies, but their strategies around education and training if they want to be successful.
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