What is it?
Financial crimes management consulting is a subset of regulatory compliance consulting and relates to efforts in meeting specific regulations designed to combat money laundering and sanctions violations, although many firms are broadening their financial crimes practices to also encompass fraud, bribery, corruption, and even cybersecurity. Financial crimes consulting came into its own over the past fifteen years as rising geopolitical events and terrorism prompted governments to crack down on the responsible perpetrators by shutting down their sources and means of funding. Through enforcement by various agencies, Governments have enlisted financial institutions, in their role as financial intermediaries, to identify and report financial crime and assure industry adherence through the use of high profile enforcement actions with large penalties for non-compliance.
The fundamental need for Financial Crimes consulting is driven by a need primarily by financial institutions to establish programs to comply with Anti-Money-Laundering (“AML”) related regulations around customer onboarding and “know-your-customer” due diligence requirements, transaction monitoring policies, procedures, and systems, and risk assessment design and execution.
Before many institutions could establish or strengthen these AML program elements, waves of stricter AML-related regulation resulted in numerous high profile enforcement actions, spiking consulting demand for crisis-oriented, regulatory response and remediation of deficiencies discovered by regulatory examiners around these core areas.
While regulatory response and remediation services are driving current demand, clients are beginning to catch-up with a slowing pace of new regulation providing an opportunity for clients to move beyond reactive backward-looking remediation activities toward more proactive forward-looking program design and process improvement with some clients considering even more aspirational technology transformations.
After years of throwing money and bodies at reactive, ad hoc compliance initiatives, there is a tremendous opportunity for productivity gains through the thoughtful application of measurement, standardization, demand management, and lean processes. Moreover, new technology solutions and data methods offer the opportunity for transformative advances in lowering costs while improving the effectiveness and efficiency of the end-to-end processes needed to monitor, detect and report financial crime. That said, a majority of institutions are still very much at the low end of the AML maturity curve. Service providers aspire to offer a full complement of services needed to address client needs across the financial crime maturity lifecycle.
■ Regulatory Response & Remediation: These firms offer cadres of knowledgeable, well-trained, global resources to help clients gather, validate and analyze huge volumes of fragmented customer and transaction data, often under tight regulator-imposed deadlines. They may also act as a disinterested intermediary providing independent testing and assessments to expose the nature and extent of identified or potential deficiencies.
■ Program Design & Enhancement firms: Firms in this group seek to bring together and coordinate the right combination of expertise across the full breadth of their firms’ industry, strategy, operations, technology, and data analytics capabilities to deliver the best possible solutions tailored to the client’s specific regulatory needs, institution type, risk appetitite and resources. These service providers offer a cross functional perspective in applying optimization concepts to organizational and process design including program management to drive change.
■ Technology Led Solutions firms: The firms in this group offer their proprietary modular solutions and ability to partner and collaborate with a broad vendor ecosystem to architect and deliver purpose-built, end-to-end technology solutions, which may or may not include managed services and outsourcing.
■ Full Service firms: Full service firms possess formal practice areas with dedicated teams offering a full slate of services to meet client needs across the entire financial crimes compliance lifecycle from remediation to optimization and offer some of the most sophisticated frameworks, tools and analytics for designing solutions based on cumulative experience working with clients to overcome challenges in responding to a constantly evolving regulatory landscape. The growth outlook for financial crimes consulting remains strong as regulators persist in raising the bar on existing compliance laws and extending their focus to new industry sectors such as financial advisors, casinos, real estate brokers, and jewelers, among others. These shifts translate into greater consulting activity as enhanced scrutiny, and the threat of regulatory examinations motivate companies to reevaluate and strengthen their internal controls.