REGULATION AND COMPLIANCE TECHNOLOGY
The technology bringing sanctuary and surety to finance Jean-Paul Mergeai, Managing Director of Temenos for Middle East & Africa defines the essential role of technology in compliance with regulations and risk management. Jean-Paul Mergeai, Managing Director, Middle East & Africa
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iven the increasing adoption of technology in the wake of the COVID19 pandemic outbreak, where is technology playing a significant role in compliance risk management currently?
Financial Crime Mitigation (FCM) technology is growing resulting from Covid-19, with heightened levels of fraud, including cyber fraud, as criminals exploit the pandemic. It’s a big problem for victims, for authorities and for banks, with their legal responsibility to protect their customers’ money and data and prevent money laundering.
As an organization, what are some of the most advanced innovative approaches to compliance risk management you have implemented? In many areas of banking, cloud and SaaS technology is a catalyst for exciting innovations in compliance; lower infrastructure costs, developing products faster with greater resilience, scalability and security. This year, Temenos announced a joint effort with Microsoft to enable access to its AI-powered FCM SaaS solution. Deployable in weeks, it allowed banks to protect their customers and their organization from financial crime increases during the pandemic, particularly as banks moved to remote working for staff.
What trends in regulation and compliance do you see applying 28
to financial institutions in the MENA region? Th e b i g t re n d i s d i g i t i s a t i o n i n compliance, such as electronic customer identification. Banks are investing in the digitisation of their compliance function as an integral part of customer onboarding. In the UAE, national digital IDs operate, allowing banks and their tech providers to implement paperless “know your customer” authentication to accelerate on-boarding new customers. Initiatives like “smart Dubai” aim to remove paperwork entirely and provide the data on which to build better services for residents.
What type of ongoing monitoring and auditing processes have you put in place to assess the effectiveness of your compliance programs? Compliance costs directly affect the profit of banks (estimated at $270bn per year) meaning devoting fewer resources to innovation and risk. Expenditure is unavoidable as compliance with regulations is mandatory. Governance, risk, and compliance account for almost 20% of banks operating costs and noncompliance has severe implications including stiff penalties. Over $350bn were paid out by banks for non-compliance and compliance breaches in the last decade. Temenos offers significant help reducing compliance overheads. We leverage our wide client base and extensive experience to offer packaged toolkits
Banking and Finance news in the MEA market
and solutions to help our clients remain compliant with changing regulatory and business practice requirements. All the regulatory compliance solutions are pre-integrated into standard Temenos software, streamlining their adoption and subsequent usage.
What do you see as the greatest challenges for the financial services industry in enforcing compliance? Demand for financial compliance and the increasing levels and types of financial crime put huge pressure on banks. Legacy processes are complex, inefficient and error prone. High levels of false positive rates exacerbate this problem, increasing recruitment costs to address the issue.These challenges mean banks face reputational risk, fines, costs and losses to fraud.
How do you envision financial regulation and compliance in the future? A major regulatory opportunity (and challenge) for our industry is Open Banking. Having a system using AI, focusing on realtime behavioural analysis is essential. These systems build user and customer profiles to detect and stop suspicious transactions, considering elements such as transaction type, amount, currency and frequency. Parameters can be combined and compared to ‘usual behaviour’ or predefined patterns, elements giving banks the ability to stop suspicious transactions before funds are transferred.
