Strengthening The Compliance Fortress In The Banking Sector

Chuan Lim Ang, Managing Director And Sg Head Of Compliance, Cimb

Chuan Lim Ang, Managing Director And Sg Head Of Compliance, Cimb

As the head of compliance at a major bank, you are on the receiving end of regulatory expectations. How are you and other compliance practitioners managing the increasing list of demands?

Regulatory requirements continue to evolve and expand, and this trend doesn’t look like it is stopping anytime soon. Across most jurisdictions, you also see regulators committing to a more intensive and intrusive supervisory approach to better manage the risk in the financial sector.

It’s certainly no laughing matter to be at the receiving end of regulatory expectations, but fortunately, compliance is not alone in holding the fort. It is a bankwide effort where we partner with various business units and teams such as operations and technology to meet increasing regulatory demands and expectations.

While compliance practitioners are very conversant with rules and regulations—the ‘what’ needs to be done and ‘why’ (or policy intent)—we need to collaborate closely with other stakeholders to operationalize what’s needed considering the bank’s set-up—this is the ‘who’ and ‘how.’ And it’s important to get all these right at the onset, with strong senior management oversight, appropriate frameworks and processes, supported with smooth execution.

Another approach is to make good use of the consultation phase by providing constructive feedback to the regulators when they are formulating regulatory proposals so that policy objectives can be achieved while simultaneously taking into account industry concerns and operational challenges.

There’s a saying across the industry that compliance teams need to continually ‘do more with less.’ What's your view on the ability to use artificial intelligence (AI) and data analytics (DA), given the present state of technological and product development?

“Do more with less”—that is the new mantra not just for compliance, but across all sectors and industries.

Indeed, leveraging AI and DA could be the way forward. We should devote limited human capital to tasks that create the most value, especially in areas where the analysis and judgment calls, are more critical. AI/DA can also be deployed in other areas that are more operational and routine, such as trade surveillance, name screening and transaction monitoring, a path that many banks are embarking on.

However, it is important to validate every set of AI/DA that is used for compliance processes. It is not enough to say “Let’s use this Blackbox— this is great because it reduces the number of alerts, creates less work, runs faster, and less headcount needed and so on.” This simplistic approach will not get you past the regulators. As a bank, you (or your vendor) must be able to explain what goes on inside and behind that Blackbox, how it works, who validates it and how are you ensuring that it continues to be fit for purpose.

We should all play our part to uphold that trust and continue to stay vigilant against financial crime

AI/DA can also help us be more effective in risk management. This is not the same as relying on AI/ DA for pure efficiency. The more common AI/DA that banks and financial institutions are exploring fall into the categories of network visualization and fuzzy matching to detect clustering through centrality analysis; node detection through name-matching and tagging; interactive dashboards to flag out hub/spoke transactions and among others.

One of the biggest shifts in compliance over the past decade has been the very high expectations that regulators have for banks and financial institutions to tackle financial crime. How do you see this playing out in the future, particularly in Singapore?

Over the past 10 to 15 years, there has been an increased focus on financial crime across all fronts, whether it’s the international community, standard-setting bodies, regulators, media as well as the general public. Banks and financial institutions are in the spotlight and they are trying their very best to deter and disrupt financial crime, often sparing no efforts in the process.

In my opinion, that is the right approach— to set a high bar, to maintain high standards. Singapore (as well as many other jurisdictions) is an international financial center and handles significant inflows and outflows for a variety of reasons—financing, investments, payments and so on – for legitimate purposes.

For many of us who live, work and do business here, our aspiration is for Singapore to be a financial center that is clean and trusted, a vibrant city that is competitive and conducive for enterprises and a country that continues to grow and prosper.

The Monetary Authority of Singapore (MAS), the central bank and de-facto financial sector regulator in Singapore has in place a robust and comprehensive antimoney laundering (AML) framework that is in line with international best practices— stringent licensing controls, strong supervision and detection, good coordination between government agencies, sharing of data and financial intelligence and swift/ firm law enforcement action when criminal activities are uncovered. This sound and stringent regulation is what gives Singapore its reputation as a trusted financial center with strong governance.

We should all play our part to uphold that trust and continue to stay vigilant against financial crime.