By: Dan Frechtling, SVP of Marketing and Chief Product Officer
KYC policies are causing nervousness within banks. Half of the anxiety is caused by regulators and the other half by customers. First, there are the regulatory frameworks. FDIC and OCC guidance is constantly changing. Enforcement varies from month to month. Operation Chokepoint ebbs, flows, and ebbs again. Second, there’s the nature of today’s customer base. New business entities are replacing old ones with a twist on the old proverb, “no history is good history.” Further, customers are increasingly cross-border, global actors.
In response to this unpredictability, a new category of KYC solution is rising to help banks stay compliant and reduce fraud — consistently and efficiently. Deloitte Consulting calls this Enterprise Fraud and Misuse management (EFM).
An EFM can help banks detect fraud, remain compliant with regulations, lower expenses and find criminal activities would normally not be noticed. Several tenets underpin EFM. As Deloitte consultants explain in Confronting KYC with Less Angst, EFM solutions are grounded in data and include:
- Predictive models to uncover patterns and likely outcomes
- Data manipulation through visualization and text analytics
- Hosted web services that replace the high costs of in-house systems
Predictive models are made possible with the advance of data science, the arrival of vast cloud storage capacity, rapid analytic processing, and the information to pump through these systems. Over more than a decade, G2 has built an understanding of cause-effect relationships and a robust IT architecture to identify leading indicators and forecast fraudulent activity.
Data manipulation turns complex equations into understandable graphs and charts. Volumes of text are categorized and simplified. Rather than a swarm of raw data, risk managers see proportion and relationships. They are in control, even when the source material is unstructured. G2’s online portal provides a visually rich experience and helpful benchmarking to enable this control.
Hosted web services and on-demand reports obviate the need for software installations and expensive integration. Rather than being subject to IT schedules, they work around them. At the same time, they support legacy systems because they are capable of porting data directly to the platforms financial institutions (FIs) use through simple APIs. G2’s products and services, powered by advanced technology and guided by highly experienced analysts, achieve the independence and interdependence of web services.
Dan Krittman and Tyler Langenkamp, senior consultants at Deloitte, summarize EFM like this:
“By taking an EFM approach and integrating a fraud analytics platform, financial institutions can be better equipped to identify and deter potential incidents before they happen, as well as prevent their recurrence if they do.”
EFM products are not wonder drugs or a cure-all. But solutions like G2’s KYC Governor® alleviate the anxiety of financial institutions at a time when predictability is elusive. Only G2’s Merchant Map® has historical fraud and compliance violations as well as the connections between entities and individuals, making it harder for bad actors to hide from banks. See for yourself.