Ensuring regulatory compliance within a correspondent bank network

Regulatory pressures continue to change the way in which banks monitor, manage and maintain their correspondent relationships.

Last week Thomas Murray Data Services hosted a webinar on ensuring regulatory compliance within a correspondent bank network. The webinar explored the need for banks to ensure regulatory compliance with a focus on AML (anti-money laundering) and KYC (know your customer) issues, the increasing need to standardise and streamline efficiencies and the challenge of cost avoidance and reduction which has seen banks of all sizes start to look closely at their internal processes.

You can view an overview of the webinar here:

For an audio recording of the entire webinar, please click here:

You can view the presentation from the webinar here:

Ensuring regulatory compliance within a correspondent bank network presentation

The biggest challenges faced by banks

Over 70 banks took part in our survey, conducted in January 2016, on the difficulties correspondent banks are facing. The results of our benchmarking poll highlighted a common pattern between banks around the world, irrespective of whether they are a small to medium bank or a large international bank. 82 per cent of banks picked ensuring regulatory compliance as one of the biggest challenges they will face in 2016.

The results of the survey, however, were very close with the second highest challenge being improving data quality with 78 per cent of banks recognising this as a prominent struggle. This was closely followed by 72 per cent of banks finding it problematic to streamline processes and to improve efficiencies. Other issues that were emphasised included how to reduce or avoid costs, with 65 per cent of respondents worried about keeping costs low whilst improving procedures. Also noted as problematic was how to better manage correspondent relationships and how to improve communication internally cross-department, as well as externally to underlying clients or correspondent banks.

The main pressures placed on banks by regulators

Understanding the markets that you are invested in is one of the key themes that reappeared throughout our discussions as one of a many solutions that help alleviate the pressures banks are currently experiencing.

Reliable market intelligence, moving from a less manual way of processing and handling data, and a centralised system are the three top solutions spoken about during the webinar. “With banks historically working in a manual way, it is easy to see why, with the increased AML/KYC pressures that banks must now seriously look at changing the way they operate on a day to day base if they want to avoid huge financial penalties” warns Michael Hill, Global Head of Cash Strategy at Thomas Murray Data Services.

Steps to take to comply

Banks are increasingly realising the need to move away from a manual and dispersed way of working. As the growing need for transparency draws the spotlight on having a group wide centralised, online, auditable and controlled correspondent bank management process, the only way forward is to start automating and centralising systems. In order to comply with applicable AML and KYC standards, the most significant change a bank can make is to simplify and standardise key processes. A centralised repository of all static data, documentation, account information, including AML and KYC requirements, enables a bank to fully comply with increasing pressures as well as significantly improving the quality of data being stored. With only eight per cent of banks polled finding it easy to deal with issues involving complying to AML and KYC requirements, it goes to show that an overwhelming majority of banks are finding difficult to tackle these issues. “There’s a direct correlation of banks using a centrally managed, standardised and more automated system being able to comply more easily, whilst significantly reducing operational costs was another interesting statistic that was uncovered from our survey” says Hill, “The results, were also concrete proof of the ongoing research that Thomas Murray Data Services has been doing on the subject for over five years – that FinTech and market intelligence are must haves for banks in 2016 and beyond!”

How a third party provider can assist

Thomas Murray Data Services has been a leading provider of global capital market and cash data for over two decades and is perfectly placed to support banks overcome the challenges they are currently facing.

Whilst some banks will argue that they can simply build or utilise an in-house system, the reality is that this option will prove to be too costly, provide many business disruptions and ultimately fail to ensure that banks remain on top of the increasing landscape changes moving forward. “Implementation of our management tool has helped banks reduce operational costs whilst enabling them to become more efficient, controlled and transparent in their operations” says Hill.