Agility, risk and culture: three priorities for change

Clarity on Financial
Crime in Banking

Switzerland as an international financial center is exposed to huge risks from financial crime. This is increased by outdated transaction monitoring systems, inadequate approaches to Know Your Customer and poorly determined risk appetites.

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The impacts of financial crime on Switzerland’s banks

Financial crime has very real, significant implications for Swiss banks. The impacts are clearly visible when looking at key statistics around notifications and offences.

0 billion CHF
16,471,066,844 CHF
Total asset value of all Suspicious Activity Reports received
Suspicious Activity Reports
Mandatory Suspicious Activity Reports
Money laundering
Criminal organization
Dishonest business management
Aggravated tax offence

Source: Money Laundering Reporting Office Switzerland (MROS) annual report 2017

How banks must step up the challenge in the fight against financial crime

As value chains become more hyper-connected and criminals more sophisticated, the potential impacts of financial crime are growing. Yet, banks aren’t investing enough in specialists and systems to counter this threat. There’s an urgent need to improve risk profiling, compliance cultures and the use of artificial intelligence tools.

Philipp Rickert

Partner, Head of Financial Services

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Four guiding principles for Swiss banks to more effectively combat financial crimes

1. Swiss banks must rise to the challenge of detecting and preventing financial crime

More precise, bank-specific risk assessments must become a priority for Switzerland’s banks. To enhance the quality of alerts it furthermore requires qualitative improvements in areas such as client databases, transaction monitoring systems, and the usage of artificial intelligence.

The question is do we detect more money laundering-related circumstances through more automated and more efficient tools? In my view, this could only be achieved through tools which have the ability to learn without being explicitly programmed.
Martin Peter, Head of Compliance & Operational Risk Control and member of the Executive Board, UBS Switzerland AG

The answer to tackling financial crime is not to expand the Compliance function. The answer is to educate and empower employees to identify risks in a broader range of issues. Martin Peter shares his thoughts on the challenges facing a large bank in addressing crime.

Read the full interview in the publication

What major challenges was your bank confronted with in the last two years?

Percentages and statements relate to responses to KPMG's Financial Crime in Banking Survey 2018

2. The human factor: filling gaps with specialist knowledge

The detection and prevention of financial crime would be significantly improved through greater investments in specialist support to raise the quality of data and analysis.

The profile of compliance officers must evolve: they must no longer be only regulation, control and risk experts but must also master information systems. Some banks now incorporate IT specialists in their compliance teams.
Aurélien Dubus, Head Compliance, BNP Paribas (Suisse) SA

Only 18% of the surveyed banks built a specialized team to investigate financial crimes and 2% is currently establishing such a team. As for the remaining 80%, the team specifically handling financial crimes is…

Percentages and statements relate to responses to KPMG's Financial Crime in Banking Survey 2018

BNP Paribas (Suisse) SA is a leading European bank for companies, institutions and private clients in Switzerland. Aurélien Dubus shares his insights into compliance risk management and how to build specialist competences to be able to manage the unexpected.

Read the full interview in the publication

3. Critical components for robust compliance: strong culture, tone at the top and an effective sanction system

A strong compliance culture and appropriate tone from the top is important, but is not by itself sufficient to prevent financial crime. Actually enforcing sanctions against employees who breach compliance policies is likewise essential.

The board for its part must really engage with compliance, raise questions and go beyond pro-forma receiving of reports, so the tone from the top can be actively formulated.
Gemma Aiolfi, Head of Compliance, Corporate Governance and Collective Action, Basel Institute on Governance

What kind of corporate attitude is essential for an overall consistent and efficient compliance?

Percentages and statements relate to responses to KPMG's Financial Crime in Banking Survey 2018

Gemma Aiolfi discusses the challenges facing banks in combating financial crime, including the need for senior management to lead by example.

Read the full interview in the publication

4. MROS notifications must be based on quality

It is the responsibility of banks to ensure that MROS notifications are appropriate and necessary, and that the motivation behind the notification is correct. By swamping the MROS with low quality notifications, banks could be limiting its ability to effectively filter and forward cases to law enforcement agencies. Ironically, the increase in inappropriate notifications ultimately produces a riskier environment.

We can only maintain a good reputation if we work together, that is privately by financial institutions, and among regulators and, furthermore, by prosecutors. If we do not collaborate properly and transparently, we will never reach our objective.
Bernhard Hecht, Public Prosecutor and deputy to the Head of the Department for Legal Assistance, Money-Laundering Offenses and Asset Forfeiture of the Prosecutors Office of the Canton of Zurich

43 of the surveyed banks had to inform any authority about a suspicion of a financial crime in the past 3 years. 7 banks did not inform any authority about a suspected financial crime.

Percentages and statements relate to responses to KPMG's Financial Crime in Banking Survey 2018

Moves are underway to change some aspects of how public prosecutors can handle data, significantly impacting on collaboration with foreign authorities. At the same time, the MROS is being inundated by a huge surge in the number of reports from Swiss financial institutions. Bernhard Hecht, Daniel Tewlin and Arnaud Beuret discuss this and more during an interview.

Read the full interview in the publication

Clarity on Financial Crimes in Banking

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KPMG Switzerland

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Philipp Rickert

Partner, Head of Financial Services

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Philippe Fleury

Partner, Financial Services, Head of Regulatory & Compliance

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Pascal Sprenger

Partner, Financial Services, Regulatory & Compliance

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