Business has changed. Where before it was all about profitability, shareholder dividends and a laser-like focus on efficiency, today organizations are concentrating on ethical business growth.
Ethical is the key word here. No organization wants to be the next Volkswagen, the next FIFA…the next topic trending on Twitter for all the wrong reasons. They don’t want to run their business, only to find a nasty surprise—a bribe, maybe or money laundering activity—surface six months later.
Make no mistake, it’s that relentless requirement to meet customer due diligence, anti-money laundering and Know Your Customer (KYC) standards that keeps the board awake at night. Of course, the ambition remains to achieve strong profitability, shareholder dividends and efficiency. However, the mission of almost every organization today is to balance this growth against the requirement to meet regulatory and ethical commitments.
And those regulatory and ethical commitments are everywhere, nowhere more so than in the financial services sector. Financial institutions (FIs) and insurance companies face a wall of compliance legislation, whether from the 4th EU Money Laundering Directive, the UK Bribery Act, KYC policies, understanding beneficial ownership, the Foreign Account Tax Compliance Act (FATCA) or Common Reporting Standards (CRS) legislation.
It’s not just the scale of the legislation that is so daunting, it’s the complexity of it all. For example, your organization may be adhering to these rules and regulations in Europe, but try applying them to your Asia-Pacific business and the directives may be entirely different, requiring modified (and expensive) systems, policies and procedures. We can also see this legislative complexity in ‘FATCA fatigue’, whereby FIs have tackled their FATCA legislative requirements, only to be exhausted when confronted by overlapping and even more demanding CRS legislation.
Organizations can’t sit on their hands though: the penalties for not achieving ethical business growth can be severe. Alstom, for example, received the largest the Foreign Corrupt Practices Act-related criminal fine in history: $772 million. Barclays Bank was fined £72 million after its wealth management arm ignored its own processes in a sensitive £1.9 billion deal. Commodity trading firm Marubeni faced an $88 million bribery fine. The list goes on. And these fines don’t take into account the diminished customer trust in the brand, the lost shareholder value and the massive legal bills.
This risk is converging too. Organizations need to look at their global ethical standards—not just their regional situation. Many of the anti-bribery fines in the U.S. for example have been issued because the FI was unable to identify the lineage of the transactions as it passed through its different international entities. The risk is also converging externally. Organizations need to monitor their ethical and regulatory commitments with partners, suppliers and third-party agents as closely as they do their internal processes.
Put the potential of data to work
So how can organizations master this compliance complexity and cost-effectively drive ethical business growth? The answer lies in the way a company organizes its foundational reference, financial and compliance content. Typically, that data is held in multiple silos, it resides inside ‘in-house’ record-keeping conventions, fragmented enclaves of investment exposure or a mix of proprietary IT platforms and systems.
The imperative is to make that data consistent, relevant and global. You need a complete, 360-degree view of your data to uncover the truth and meaning from data. That analytics-based visibility can be used to perform KYC efficiently, identify and verify entities globally, ensure regulatory compliance and mitigate reputational risk.
Take customer onboarding, for example. You need the appropriate governance and controls in place to determine a business is who they say they are, are located why they say they are and are engaged in the type of business they say they do. By understanding your data, you can identify and verify businesses and people against watch lists, politically exposed persons and adverse media data. You can also screen entities, establish beneficial ownership structures with natural persons, store the evidence, and create a complete audit trial.
Once onboarded, you need to be certain your organization is working with the correct client entity throughout the client lifecycle. Again, a data management platform can help you uncover the truth and meaning from data. An entity verification system—such as the Dun & Bradstreet DUNS number—collects, aggregates and verifies data from thousands of sources daily. This eliminates the traditional ‘heavy lifting’ associated with business verification, and helps ensure the business you are transacting with is done with the right level of accuracy, diligence and governance.
How can executives tasked with compliance justify the investment in a data and analytics platform? First, there is the risk on not investing: the risk that the company will be exposed to non-compliance and all the financial cost and damage to brand reputation associated with this. Second, investment in a data and analytics platform can be shared across multiple business processes and business units. The high quality data absorbed into the onboarding verification process, for example, can be used just as easily to support data quality activities in Sales or Customer Support.
Adherence to ethical business standards needs to be a proactive process—adopting a compliance management platform to identify risk before any damage has occurred. Choose the right data management platform, and it will support your firm’s strategic drivers of achieving profitable growth, while remaining compliant and minimizing reputational and regulatory risk.