Many financial crime specialists have been skeptical of the usefulness of “advanced analytics” and “big data,” but their practical value in combating financial crime issues is increasingly undeniable. A misconception remains, however, that “big data” is only for the “big guys.” The truth is that firms both large and small can benefit from incorporating big data and other analytical tools into their procedures.
Even small companies and institutions have enormous amounts of data they can leverage for improvement. Advanced analytics help all organizations to:
- Increase their understanding of their customers
- Enhance efficiency in their operations and organizational processes
- Ensure that no financial crime trends are missed
Analytics systems have evolved significantly since their introduction in the early 2000s. Originally, they were expensive, enterprise-level platforms that required business intelligence specialists to be operated. Companies that had the early systems were forced to divert attention and resources from their IT departments to perform discovery work in litigation or build searches or reports to monitor for suspicious activities.
Today, there are more user-friendly tools that any business user, including a compliance analyst or manager, can leverage for greater utility. This builds tremendous power for businesses to augment their existing reports and monitoring solutions for their investigations. Stakeholders can craft any type of custom report and instantly perform “what-if” or discovery searches through the data to extract relevant information.
System costs have also largely dropped. Some vendors today include analytical capabilities within, or as an optional overlay to, their monitoring systems. This allows their use to move “down-market” and become more affordable for medium-sized and small organizations. Also, the availability of Hadoop and other low-cost, open-source offerings further puts pressure on big data vendors to lower their prices.
Analytics strategy can help avoid implementation pitfalls
Big data poses big benefits, but may come with these and other implementation challenges:
- Lack of ownership of the initiative
While IT may be the traditional “owner” of data projects, the implementation of analytics technology requires a business owner to identify the potential applications, use cases and benefits of an analytics approach, then work with IT on strategy. A business owner should define the “burning issue” – the problem that must be resolved to improve results or efficiencies – and articulate a clear ROI to be a catalyst for adoption.
- Data quality issues and deficiencies
If data isn’t reliable and timely, analytics system outputs will be constantly questioned. Working early and often with IT colleagues can mitigate data quality issues.
- Lack of collaboration
In the compliance area, a key to success is accessing relevant data across the enterprise. To achieve this, look to other areas of the institution or business, such as the marketing or risk management departments, where analytics or business intelligence tools may already be used to leverage their data. Or, work with those departments to refine the potential use in cases and applications of big data, which helps the IT department better focus big data investigations.
Big data can improve operations across an institution
Institutions and companies do not have to scrap the technology, infrastructure and process investments they have already made, but can leverage big data and analytical approaches and tools beyond existing systems to improve them.
The three major benefits of leveraging analytics are:
- Better able to react more quickly to changing financial crime threats
Analytical tools promote a more proactive approach to compliance-based monitoring and overall risk assessment, which benefits other areas including corruption and fraud prevention, AML work, sanctions, FATCA compliance and more.
- Advanced analytics lead to enterprise-wide client risk assessment
Incorporating advanced analytical tools helps stakeholders move from a transactional mindset (i.e., following transactions and activities to see what they might mean) to an insight mindset, allowing the prediction of issues before they occur.
- Improved efficiencies across the board
While analytics approaches require initial investment, they can quickly help mitigate growth in financial crime compliance costs through greater efficiencies, even with expanding transaction and data volumes.
To assure they get the greatest yield from an analytics investment, stakeholders must delineate the needs of their organization and assess the vendor offerings in light of their important requirements. According to the Sloan Data and Analytics Review, an online publication of the Massachusetts Institute of Technology, the most valuable features sought by purchasers of advanced analytics tools are:
- Easy-to-read charts and graphs,
- Data profiling,
- Robust search and discovery capabilities,
- “Software as a service” (SaaS) or cloud-based accessibility
- SaaS and cloud solutions can help reduce the overall cost of ownership through subscription based licensing. Additionally, these tools require minimal internal maintenance and users gain automatic access to new releases and upgrades.
The time has come for institutions and companies of all sizes to befriend advanced analytics. In today’s technological environment, data abounds in every tool in every office. Failure to leverage that big data is a missed opportunity for success, operational improvements and cost savings.
Note: Data analytics will be covered on a crucial panel at the ACFCS 2014 International Financial Crime Conference February 5-7, 2014 at the Marriott Marquis in New York City. For more information, click here.
*Karen Van Ness is Principal Consultant for Compliance Risk Solutions in Austin, Texas and a member of the ACFCS Advisory Board. She is an accomplished financial crime and compliance professional with over 20 years of experience in the compliance and risk, software and analytics, and financial services industries. She has played a key role in bringing to market monitoring and analytics solutions targeted to financial crime and compliance for leading firms such as Mantas, Oracle and LexisNexis Risk Solutions.