Enabling Better Compliance and Risk Management in Banking Industry

Compliance and Risk Management have always featured among top priorities of banks and financial institutions globally. In the light of recent happenings in India, involving heavy penalties being levied by the Reserve Bank of India (RBI) on several banks, compliance has assumed even more significance, and cannot be overlooked. To a certain extent, when compliance is taken care of, risk is automatically mitigated.

In order to effectively address the problem of money laundering and counterfeit currency notes, meticulous observance of KYC/AML/CFT guidelines cannot be compromised. Risks are inherent in any financial intermediation. These risks emanate from the day to day operations of banks and the environment within which they operate. It is therefore, incumbent upon banks to identify the risks they are exposed to, and institute a systematic approach to control them.

Most important tools for facilitating enhanced compliance and better risk management are end-to-end process monitoring and real-time reporting. Banks are required to submit a number of reports to the RBI; including Cash Transaction Report (CTR) every month, Suspicious Transaction Report (STR) as and when suspicious transactions are identified, Counterfeit Currency Report (CCR) as and when counterfeit currencies are identified and Non-Profit Organization transaction report (NPOTR) every month. Besides extensive real-time monitoring for “High Risk” category accounts, banks are also required to preserve all the records pertaining to such accounts for a period of at least ten years from the date of each transaction between the bank and the “High Risk” account customer. Banks should also ensure that risk categorization of customers is reviewed at a periodicity of not less than once in six months.

Nevertheless, use of Information Technology can address most of the compliance and risk management needs of banks. With a view towards ensuring regulatory and statutory compliance, banks are procuring suitable technologies that can provide assistance in their endeavor of enhancing compliance, thereby minimizing risks.

A Business Process Management (BPM) engine, which can define rule-based routing at each step of the KYC document verification and automate the entire process of gathering and validating information about the customer, will serve as a great tool for maximizing compliance and therefore mitigating risks associated with suspicious accounts. Real-time monitoring of processes will also ensure that loopholes, if any, are identified and corrected so as to achieve 100% error-free compliance.

An enterprise-wide content management (ECM) solution can help in creating, retrieving, modifying and archiving large volumes of data, such as data related to various compliance requirements, or data on KYC information of account holders. Access rights can be defined for these records to ensure security and privacy of confidential information. An efficient Records Management System will ensure that all records that a bank is required to preserve remain invulnerable to disasters and available whenever required.

To complement the above benefits, banks may also use a comprehensive Communication Management solution that can enable them to manage customer-centric communications (letters/reminders/notices and Greetings to customers improving communication), and can also facilitate timely submission of statements to regulatory authorities.

Newgen Software, a pioneer of the IT product industry in India, understand the compliance and risk management challenges faced by banks, and have come up with a range of innovative, scalable solutions to help banks . Newgen’s Business Process Management, Enterprise Content Management, and Customer Communication Management suites have helped banks in India and across the globe to address stringent compliance mandates. Banks have also leveraged Newgen’s expertise in this domain to reduce various kinds of risks, including Credit Risk, Market Risk, Systemic Risk, Legal and Reputation Risk, among others.

With these and many more innovative products such as OmniCompliance, an integrated solution specifically customized for warranting Compliance and Risk Management, Newgen Software is determined to assist banks in their effort of achieving 100% compliance and insusceptible risk management.