This is the first part of a three part series in preparation of our webinar series on the 16th of July. We will be discussing how Blockchain, Natural Language Processing & Machine Learning can be used world-wide in the issuance of securities, such as LEI & ISIN, as well as in Corporate Actions & Announcements.
For more information and registration, click the link below!
In the push to digitize their more complex business processes, many financial services organizations are struggling to find the right technology balance - one that enables the open exchange of information across systems while maintaining security and controls to mitigate risk.
While phishing and identity theft in consumer banking make the headlines almost every day, these events represent relatively little exposure to the financial institution itself. The picture is very different in high value, high risk transactions related to LEIs, ISINs, and Corporate Actions and Announcements. In these areas the financial institution can be held accountable and face stiff financial and regulatory penalties if found guilty of negligence. In recent Quincare legal actions, banks have faced civil penalties in the hundreds of millions of dollars as a result of poor oversight and intervention in high-value transactions. In the U.S. the Office of Foreign Assets Control (OFAC) has stepped up legal enforcement and penalties for institutions that engage in financial transactions with prohibited companies and institutions. Even if a bank or investment firm has engaged in activities with that institution previously, the burden of responsibility falls on the U.S. governed institution to ensure compliance by referencing the Sectoral Sanctions Identifications (SSI) List, amongst other actions and safeguards.
The use of digital tools and data can have far reaching positive impacts beyond just uncovering errors or fraud. In February 2020 U.S. intelligence forces uncovered a “bounty” program to kill US soldiers in Afghanistan when they followed the trail of large (electronic) financial transactions between a Russian military-controlled bank account and an account linked with the Taliban.
The Benefits of a Digital First Mindset
It’s understandable that some institutions might be cautious about integrating systems and digitizing processes, but the benefits of integrating LEI, ISIN and Announcement data far outweigh the risks:
- Human actions account for 80% of errors in business process transitions. Removing human input from processes significantly increases consistency and compliance
- Integrated systems helps organizations achieve compliance with changing regulations over 50% faster than stand-alone systems
- Sharing data across systems mitigates risk and boosts compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements by surfacing inaccurate or fraudulent information
In a recent GLEIF blog post, Alan Deaton, Chairman of the LEI Regulatory Oversight Committee and Associate Director in the Division of Insurance and Research at the Federal Deposit Insurance Corporation (FDIC) noted “The benefits of the LEI are substantial. In particular, its support of regulatory and private sector analysis of counterparty risks, interconnectedness, and complex group structures.” In short, financial institutions that leverage the institutional information stored in public databases like the LEI Index enjoy a significant competitive advantage in risk mitigation, as well as overall operational efficiency. Expanding data access to support ISINs, Corporate Actions and Announcements will only increase the headstart these institutions have over their more technologically conservative counterparts.
To register for the webinar series, click the link below!