Navigating the Complexities of Financial Crime Compliance

Proactively managing financial crime compliance is essential in an ever-evolving regulatory — and risk — landscape

By Eli Morillo

The compliance landscape has become increasingly complex in recent years across many industries. For some sectors, such as financial services, healthcare, and energy, sustainability, and infrastructure (ES&I), the compliance environment, particularly around financial crime compliance, has become exponentially challenging.

While these industries have always been subject to rigorous compliance standards, the evolving complexities around digital asset security, remote work, environmental regulations, digital payments, and more have added to compliance officers' burden.

Financial crime compliance and monitoring is a particular area of increasing concern as cybercriminals continually evolve their tactics to stay ahead of financial institutions, regulators, and consumers. AI-enabled voice fraud, for example, has risen so quickly that government agencies haven't even begun to gather data on the trend.1

Just as the fraud landscape is rapidly evolving, the need to access specialty expertise for a diverse range of compliance priorities has never been in higher demand as staffing shortages compete with budget mandates and economic realities.

To navigate these complex demands, many firms are outsourcing portions of their compliance programs to effectively and efficiently outmaneuver these complexities.

A recent survey conducted by Compliance Week and Guidehouse found that of the 26% of financial institutions that reported outsourcing, 74% felt it improved the effectiveness of their compliance program in fighting financial crime. Outsourcing components of a compliance function can allow businesses the ability to maintain their competitive footing while also remaining current with evolving regulatory demands.


Firms Outsource These Key Compliance Functions

Regulatory Compliance — Experts help assess risks and requirements, then implement the processes, procedures, and people to remediate and manage them.

Risk Management — Industry expertise and AI-powered analytics help organizations respond to risk and use it as a catalyst for organizational transformation.

Financial Crime, Fraud & Investigative Services — Financial crime compliance experts help organizations cover the bases of the governance ecosystem, ranging from financial compliance and global investigations to enforcement.


Financial Fraud Challenges on the Rise

Financial institution compliance in the modern world requires leveraging ever-evolving tools and models to stay ahead of perpetrators. The adoption of machine learning, for example, is positioned to explode as a method of fighting financial crime, requiring financial institutions to understand and invest in the technology wisely as it becomes more effective and efficient as products mature.

Another example of financial institutions' evolving needs involves how they manage customer risk ratings (CRR). Many institutions rely on the traditional scorecard model, which can result in inconsistent customer risk assessments based on subjectively determined scores. More advanced regression models can reduce subjectivity from the CRR by processing data through a mathematical framework and generating the expected rating of the customers based on a broad set of risks. While this approach is relatively more difficult to develop and update than the scorecard model, it provides more consistent risk ratings.

Monitoring, assessing, and implementing these and many other new and emerging financial crime tools and models is a complex task. Organizations must be proactive to stay ahead of the challenge. Financial institution compliance, in particular, requires constant monitoring, regular automated vulnerability assessments, and implementing a fraud technology orchestration strategy, in which customized anti-fraud technology targets specific potential weaknesses across all the organizational processes.

Outsourcing providers can support financial institutions' compliance and monitoring programs in this complex environment. Deep subject matter experts allow large organizations to stay nimble, reacting quickly to changing financial fraud tactics and regulation changes, as well as embracing the best technology and strategies to remain competitive.

The need to tap outside expertise emerged as a significant motivator for financial institutions that outsource compliance functions. In the Guidehouse and Compliance Week survey, 45% of outsourcing financial institutions reported doing so to focus on core competencies and better utilize internal resources.

A Fast-Evolving Regulatory Landscape

While security and financial crime compliance garner headlines, regulatory changes — ranging from the U.S. Securities and Exchange Commission's market structure agenda to new and forthcoming regulations meant to address climate change and its related financial risks –- present organizations with challenges as well.

One forthcoming set of new regulations for financial institutions is from the Financial Crimes Enforcement Network (FinCEN). FinCEN is expected to announce how it will implement the Corporate Transparency Act (CTA) in the near future. Despite FinCEN publishing responses to some FAQs in late 2022, many unanswered questions remain regarding the three components of the CTA: Beneficial ownership information (BOI) reporting requirements, BOI Access and Safeguards requirements, and revisions to the 2016 Customer Due Diligence requirements for covered financial institutions.

While complete information on the CTA's most significant impacts on financial institution compliance may not be available until 2024, compliance officers should already be taking action to prepare for the unknown, from establishing internal communications to assessing the organization's technology needs to comply with developing CTA requirements.

For many organizations, outsourcing those functions is critical to success in preparing for and, ultimately, complying with regulatory standards that are both forthcoming and unknown. Outside compliance experts help firms identify and prevent problems beforehand so they can have a more complete, accurate, and real-time view of their risks with confidence. The desire to achieve those outcomes was clear in the Guidehouse and Compliance Week survey. Among outsourcing firms, 65% reported doing so to reduce costs while meeting regulatory expectations — the most common reason for outsourcing cited in the survey.

Outsourcing with a Trusted Compliance Partner

In an ever-evolving world of financial crime, technology development, and regulatory changes, organizations must proactively manage the complexity of compliance requirements. Doing so while controlling costs is a challenging endeavor.

With 40% of financial institutions in the Guidehouse and Compliance Week survey reporting they were either outsourcing or considering outsourcing portions of their compliance function, it's clear that tapping outside expertise is becoming increasingly common. Many organizations in sectors such as healthcare and ES&I are effectively leveraging outsourced compliance management as well.

Working with a trusted outsourcing provider that brings deep industry expertise to the relationship is critical to success in outsourcing compliance functions. Compliance experts can help identify and prevent compliance and monitoring problems before they arise, giving organizations a more complete, accurate, and real-time view of their risks.


Download Survey Results


1. Caroline Mimbs Nyce, “It’s Time to Protect Yourself From AI Voice Scams,” April 27, 2023, The Atlantic,

Eli Morillo, Partner

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