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Forward-thinking FIs see staffing shortages as an opportunity

BY Trevor Barritt

Many have written volumes about the “new normal.” It’s pretty much a certainty that you’re tired reading about it, but the fact remains that the pandemic and ensuing events have altered the way both consumers and corporations function, and the banking industry is no exception.

For financial institutions, one of the most disruptive consequences of the new normal is heightened staffing shortages. According to The Financial Brand, four out of five banks worry about staffing, with many concerned that the employment culture shift may be permanent.

Coinciding with the banking labor shortage is the unfortunate fact that financial crime has greatly proliferated throughout the pandemic. New crime is also harder to detect and likely to intensify. To make matters worse, banks face increasingly demanding compliance mandates and regulatory rules. These requirements necessitate strong compliance units, which banks are finding difficult to staff.

The OCC calls attention to this situation in its Spring 2022 Semiannual Risk Perspective, saying, “Recruiting and retaining talent with the desired level of knowledge and experience is a growing challenge in the banking sector.” It further acknowledges that these staffing issues exist concurrently with unprecedented regulatory challenges, but regulators cannot afford to lower their standards or put new initiatives on hold because of lack of capacity in those they regulate.

So, the new normal poses a double-barreled dilemma for banks. How can your organization deal with the new onslaught of pandemic-resultant financial crime while at the same time confronting a qualified staffing shortage?

Turning a problem into an advantage

Unfortunately, even a sudden surge of new employees can’t overcome the disadvantages of outdated monitoring. Instead of agonizing over staffing shortages, progressive FIs are turning to AI-driven detection systems to mitigate financial crime, avoid the pitfalls of the new regulatory environment and confront staff shortages at the same time.

Fintech providers are stepping up to provide new solutions that address all three situations. Thanks to current advances in financial crime-fighting technology, a solution to this interconnected, new-normal problem may not be all that far out of reach.

The best higher-tech programs help alleviate staff shortages and enhance compliance in the following ways:

  • They drastically reduce the number of false positives.
  • Such a reduction in false positives greatly reduces investigatory time, resulting in huge labor savings, allowing regulated institutions fully to comply with the demands of greater regulation with the headcount that they have, even being able to redeploy some staff.
  • They allow employees to focus more on real cases of suspicion rather than spending their days trawling through a sea of false positives. This leads to greater employee satisfaction (and therefore retention) and greater productivity.
  • They relieve regulatory pressure by delivering maximum compliance and fully explainable reports.

It goes without saying that yesterday’s financial crime detection techniques are woefully inadequate. Rules-based solutions are just not able to keep pace with emerging new attack vectors. Not only do existing transaction monitoring systems (TMS) miss a substantial portion of real suspicious cases in the information contained in existing data sets, but the manual processes that go along with them cannot separate the noise from the real threats.

Also, think of all the wasted investigator hours running down false positive alerts. Reliance on old technology and overworked investigators leads to serious shortcomings in AML and fraud compliance. In fact, according to Forbes, financial institutions were fined a staggering $2.7 billion in 2021, and it looks like this level of fines will continue to grow.  Furthermore, whereas fines cause real monetary losses and reputational damage, it must be remembered that for every fine published, there are hundreds, if not thousands, of personnel hours spent in defending the firm in the disciplinary case, which diverts talent away from earning revenue and can hurt a financial institution more than the fine itself.

In addition to helping alleviate staff shortfalls, the best AI-driven platforms target money laundering with exceptionally high speed and precision, keeping pace with new crimes and regulatory changes. But if the lack of qualified staff is still what concerns you the most, consider this: having employed a top-rated AI-detection platform, one FI reports a $50M annual savings measured in staff that did not have to be hired to handle climbing transaction volumes.

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