In 2020, the true cost of financial crime compliance in PH will increase by 44%

Staff ni Anjie
Due to an increase in fraudulent transactions, the cost of fraud in the Asia Pacific (APAC) area increased to 3.51 and 3.87 times the amount of actually lost transaction values last year. These findings from LexisNexis® Risk Solutions' LexisNexis® True Cost of Fraud Study for the Philippines in 2020 show a significant increase from the regional average of 3.40 in 2019.

In 2020, the true cost of financial crime compliance in PH will increase by 44%
In 2020, the true cost of financial crime compliance in PH will increase by 44%

Insurance, banking, and financial technology (fintech) companies have all upgraded their financial crime compliance systems due to the trend. “Last year alone, the entire expected cost of financial crime compliance across all financial firms in the Philippines was $690 million, or an estimated Php35 billion,” said Bharath Vellore, managing director for APAC at LexisNexis Risk Solutions. This equates to a 44 percent increase in the total expected cost of financial crime compliance across all financial institutions.”

The beginning of the three-part Risky Business Luncheon series featured discussions on how technology can protect the finance industry from cybercriminals, money launderers, and terrorism financiers. The country's top insurance companies' chief executive officers and chief compliance officers, as well as officers from the Philippine Insurers and Reinsurers Association (PIRA) and Philippine Life Insurance Association, Inc. (PLIA), attended the series' pilot event, which focused on the insurance industry. LexisNexis Risk Solutions, in collaboration with the FinTech Philippines Association (FPH) and GeiserMaclang Marketing Communications Inc., the organizers of Digital Pilipinas and the World Fintech Festival-Philippines 2021, organized the event.

LexisNexis Risk Solutions is a global pioneer in merging advanced analytics and global identity intelligence with cutting-edge financial crime technologies such as machine learning, artificial intelligence (AI), and robotic process automation (RPA). These solutions provide customers with a precise risk perspective throughout their customer lifecycle, allowing them to make prompt and correct decisions and mitigate financial crime risk.

The first Risky Business Luncheon, titled "Teching Up Insurance," will use cutting-edge regulatory technology to encourage regulatory compliance, collaboration, and an environment of innovation (regtech). It comes as a timely reaction to a plea for the country to be removed from the Financial Action Task Force's worldwide "grey list" of financial crime hotspots (FATF). Out of 22 countries judged by this worldwide watchdog as poor in combating money laundering, terrorism funding, and other financial crimes in 2021, the Philippines is one of just three Southeast Asian nations, along with Cambodia and Myanmar.

Jonathan Rogerson, senior director of LexisNexis Risk Solutions for APAC, added that industry players must be warier than fraudsters who always attempt to stay one step ahead. “While effectiveness, efficiency, and explainability are all important aspects of financial crime compliance, their importance varies depending on the stage or maturity of your company,” Rogerson explained. “A balance must be struck between people, procedures, and technology in order to comprehend and detect risks.”

Vishal Taneja, country manager of LexisNexis Risk Solutions Philippines, encouraged the insurance industry to talk about regtech, stating that “for businesses to raise the bar in financial crime compliance, the 3 E's (effectiveness, efficiency, and explainability) of the Money Laundering and Terrorism Financing Prevention Programme should be considered.”

Douglas Wolfson, director of financial crime compliance strategy at LexisNexis Risk Solutions, discussed how efficiency enables efficient compliance at a low cost. “You're looking for a certain needle among a bunch of needles, and good technology is required to do so. Robotic process automation is advantageous because it allows machines to do time-consuming manual operations. The true value isn't in using technology to get rid of people. Rather, technology empowers businesses to upskill their employees so that they can undertake more value-added work.”

Most insurance panel discussion leaders valued effectiveness over the other two E's, describing it as critical for system expansion and upgrades. It was also indicated that top executives' initiative and support were critical in enforcing compliance.

The participants were then asked by Julie Hsiao, Southeast Asia head of sales at LexisNexis Risk Solutions, what they thought the biggest hurdles were in developing a compliant environment. She referenced Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas' opinion that the Philippines will be delisted from the grey list by 2023 if all compliance action plans are fulfilled.

One problem, according to PLIA president Benedicto Sison, is "how to move faster and accelerate our adoption reaction." It's past time for us to reimagine our business and reinvent ourselves to keep up with new technology and client demands. In the broader life insurance sector, this incident is a wake-up call.”

Allan Santos, the chairman of the PIRA, then outlined three areas where insurance might improve its technology and innovation. “One aspect is data collection and processing, which businesses struggle to deliver due to confidentiality and competence concerns. The second aspect is digital sales and service, because technology provides an opportunity to reach out to Filipinos who are currently underserved. The third is in claim processing and payment,” he explained.

Atty. Teroy Roman, general counsel of FWD Life Philippines, stated that there needs to be a standard for due diligence for regulators because industries are currently left to their own devices. Compared to developed countries, he confessed that the Philippines is only now beginning to investigate the use of AI for compliance. “Wait and see and monitor globally how our counterparts employ AI,” says one of the lessons.

With more Filipinos working from home, Etiqa Philippines president and CEO Rico Bautista believes businesses should invest in technology such as IP security. “Without sacrificing anything, the industry's innovation will continue to thrive. Certain technological solutions, such as automation and sanction lists, may be implemented. Compliance and innovation are not mutually exclusive. It's a matter of understanding the opportunities available and which technology to employ to take advantage of them,” he added.

Amor Maclang, the co-founder of GeiserMaclang and convenor of Digital Pilipinas, stated that the country must use technology to improve the insurance industry's services and capacities while reversing the country's status on the FATF grey list. “We prefer to view possibilities in technology such as regtech, Robotic Process Automation (RPA), machine learning, Artificial Intelligence (AI), Big Data Management, and cybersecurity as a tool to strengthen industry and government regulatory compliance where others perceive crises and obstacles. Technology can also spur innovation, help companies compete on a global scale, and help Filipinos improve their skills. It has the potential to ensure that no one in the sector, such as agents, is left behind. Only when we have a culture of compliance can we truly succeed in terms of innovation.”

Regtech innovations can become part of mainstream industry operations as leaders grasp the enormity of the damage inflicted by inadvertent or unintentional participation with financial crime perpetrators. “The function of government has never been more important,” Maclang said. It's no longer solely a CTO's responsibility. This is now both a business goal and a business task.”

Post a Comment


Post a Comment (0)